4. TRIPLICITIY AND UNITY IN THE FINANCIAL MARKETS

The fourth example from personal experience that I wish to use as an illustration of the prevalence of Triplicities in everyday life comes from an unlikely quarter, that of speculating on the financial markets. This subject contains a wealth of material that can be viewed in light of possessing three-fold nature, no doubt because it is such a large and wide ranging endeavour.

John J. Murphy, in his classic work “Technical Analysis of the Financial Markets” also noted a prevalence of things occurring in threes:  

…it's interesting to note how often the number three shows up in the study of technical analysis and the important role it plays in so many technical approaches. For example, the fan principle uses three lines, major bull and bear markets usually have three major phases, …there are three kinds of gaps; some of the more commonly known reversal patterns, such as triple top, and the head and shoulders, have three prominent peaks; there are three different classifications of trend (major, secondary, and minor) and three trend directions (up, down, and sideways); among the generally accepted continuation patterns, there are three types of triangles – symmetrical, ascending and descending; there are three principle sources of information – price, volume and open interest. For whatever the reason, the number three plays a very important role throughout the entire field of technical analysis. [1]

It seems that Murphy, without realizing it, was observing the phenomenom of Triplicity within technical analysis, though he did recognize that it held some importance. Throughout his excellent book on the art of trading, he outlines a methodology to trading that often exhibits a basis in understanding the whole process in a three-fold, or three step way, however he does not elucidate this in specific terms to the depth that Triplex Unity does.

W.D. Gann, one of the greatest traders of the 20th century, was a pioneer of applying technical analysis to the stockmarkets, and used a wide range of analysis and charting tools to assist him in his trading. Gann is quite famous for predicting, almost to the day, the 1929 stockmarket crash, one year before the event occurred. [2] He is reported to have made 50 million dollars on the US stockmarkets, during a time that saw two world wars and the great depression. Gann used a complex mixture of mathematical and geometrical principles in his analysis, and “the geometric forms that influenced him most were the circle, triangle and square”. [3] Study of his methods reveals that Gann too, used a methodology that could be broken down into a variety of Triplicities on many levels, although he never elucidated such a concept in his writings. However, a present day trader who also studied Gann's methods, was able to recognize the apparent three-fold nature to many aspects of the art of trading, and in fact did elucidate this in his trading courses. [4]

For a number of years I had been “dabbling” on the Australian stock market, buying parcels of shares at the minimum transaction amount ($500 on the ASX), and lost probably as much as I made. It was never a serious pastime, however my interest in the art of trading remained and I continued to read up on the subject. Things changed when I was introduced to a locally based professional trader, a humble private man, who was very successful on the currency futures markets. Not only was he profitable, but profitable in a big way. This trader had developed his own system of analysis and trading, based on study of W.D. Gann, R.N. Elliott and Fibonacci mathematics, which he operated on a home-computer, running software he had especially designed and created for himself. After being shown this home set-up, and listening to his trading philosophy, I realized that his well structured, disciplined and logical approach to the art of trading was what I wanted to learn, not only because of its viability as a profitable financial system, but also because there seemed to be a pure and natural logic to the art that was reminiscent of Taoist thought.. I considered myself lucky that he was agreeable to teaching me.

One of the most obvious examples of triplex nature found in the financial markets can be seen in historical price charting, where a line which plots price against time can exhibit trends that move in one of only three directions; up, down or sideways.  We can allocate to the up trend the nature of Yang, and to the down trend, Yin.

Sideways movement is actually a series of consecutive small up and down trends, confined to a narrow band which exhibits a sideways direction when plotted over time. Sideways movement is in effect, a struggle between upwards force and downwards force, where the forces are quite balanced. These forces are created by the number of buyers and sellers of a particular commodity. If either of the upwards or downwards forces become too strong, the balance is upset and we see an uptrend or a downtrend emerge in the price charts.

By returning to our Yin-Yang analogy, we see that an uptrend can be defined as Yang, a downtrend as Yin, and sideways movement as Yin-Yang mixed.

Analyst, trader, manager…

Trading in currency futures as a profession must be one of the most dangerous, complicated and mentally intensive ways of earning an income that one could possibly get involved with. Due to the extreme risks and rewards in this business, while some people have made absolute fortunes overnight, others have lost houses, cars and families, even their own lives, over the smallest of errors of judgment. There is indeed an incredible amount of information to absorb, in such a wide spectrum of areas, that it is next to impossible for one person alone to know all there is to know about this subject.

Yet with a careful, logical and systematic approach to learning, practice and actually doing the business of trading, it is possible for one to settle into the profession without too much strain and stress at all. I believe that in trading, more so than any other business, the key to success is knowing what you are doing. Without knowing what you are doing, it could take several years of trial and error, and thousands of lost dollars before you begin to become consistently profitable in trading. It is nothing short of common sense to know that a properly structured, well organized and systematic approach to learning this subject is crucial before quickly and efficiently becoming competent in this art.

 

 



[1] Murphy, John J. (1986) Technical Analysis of the Financial Markets; A comprehensive guide to trading methods and applications” Prentice Hill, New York. p. 79

[2] See Gann's November 1928 Forecast http://www.webtrading.com/gannforecast.htm (Accessed March 2006)

[3] Murphy, John J. (1986) Technical Analysis of the Financial Markets; A comprehensive guide to trading methods and applications” Prentice Hill, New York. p. 538

[4] The name of this trader, and precise details of his methods will not be revealed in public due to the fact that this author signed a confidentiality agreement as part of his apprenticeship.

 

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