Contributor Larry Pesavento Larry Pesavento is the founder and owner of Trading Tutor , a technical analysis education service that emphasizes recurring pattern recognition techniques. His library is one of the most complete chronologies on technical analysis, containing teachings that range from astrology to automatic trading. Larry managed the commodity department of Drexel Burnham Lambert in California for six years before becoming a member of the Chicago Mercantile exchange in In , Larry began a search for the use of artificial intelligence programs to determine the best way for day trading futures, stocks, and Forex markets.
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You are the reason I am still here to enjoy all of my friends and family. Everyone deserves to have someone love them this much in a lifetime. However, my studies always included an extensive examination of Fi- bonacci numbers. My pragmatic position on anything I learned is that it I could not use what I was studying to help in trading, then I was not interested in pursuing it any further. Ifthismaterialstimulatesyourinterest inthe subject, then introducing you to it will be worthwhile.
A word of caution, this material is based on the probabilities of trading. The art of trading is one of risk management. Amos Hosteller, one of the founders of Com- modity Corporation in Princeton, New Jer- sey, used to say, "take care of losses and the profits will take care of themselves. The pattern recognition methodology illus - trated in the text will be of interest to anyone who ever traded using technical charts.
I can say with confidence there arc very few who researched patterns to the extent I have. Each of these patterns is based on ratio and proportion. A technical chart is nothing more than a road map with a price and time axis.
These patterns repeat with a great deal of regularity. My best students have been air- line pilots. They seem to approach trading like they approach flying, following a flight plan. The similarities to trading are numer- ous. Finally, one of my goals in writing this book is to expose you to the subject of ancient ge- ometry.
Fibonacci numbers are an integral part of the numbers that make up the subject of ancient geometry. It will be of interest to some of you that many of these sacred ratios trace their origin to the cosmos. The subject is too vast for me to consider. More importantly, it is not necessary for prof- itabletrading.
It was here that Fibonacci was born. He was a thirteent h century mathematician who prima- ril y worked for the royal familie s of Italy. The work for which he is most famous is the Libre Abaci Book of Calculations. His award for this work was the present day equivalent of the Nobel Peace Prize. Fi- bonacci was largely responsible for the use of arithmetic numbers versus Roman numer- als.
Before Fibonacci, the number 30 was written XXX. After his Libre Abaci, it was writte n Legend describes his journey to Egypt as one of great discoveries. He went to Egypt to study the mathematical relationships con- tained in the pyramids. It is not my intention to ex- plore all of the geometry in the pyramids, only the Fibonacci Summation series. Fibonacci found this series when he studied the Great Pyramid at Giza.
The series is the sum of the two previous numbers 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, to infinity. These are the relationships that are constantly in the market. I first started using Fibonacci numbers in at the urging of John Hill , Sr.
Years later, Frost and Prechter wrote the book Elliott Wave Theory, which explained the wave structure and the use of Fibonacci numbers. It concerned me that not all the waves were. It was not until that I began using the square root numbers ofthe Fibonacci series SQ.
Armed with these two square root relationships, the wave structure can be more easily ex- plained. The Elliott Wave Newsletter never used these ratios. I used to fax information to them on the square root numbers, but they never responded. It is my opinion that his newsletter and technical work is the best in our business. This reminds me of one of my favorite quotes from my friend and fellow trader, Jim Twentyman "Defy Human Nature—Do the work your- self.
Of all the books I have in my library, none of the Elliott Wave material covers this impor- tant concept. I am going to keep it as simple as possible. If you can glean only one or two concepts or patterns, then this material will not have been written in vain. I can promise you this much. II you study the ratios and patterns shown here, you will realize that markets have a definite pattern hidden within their chaos.
Sorting through this chaos can is not to try to predict the future or even to know what is going to happen next. No one knows that! It is not necessary to know what is going to happen in 5 days. What is necessary is to determine how much risk and profit potential is available in the next 5 days. Probability is the name of the game. Risk control is of tantamount importance. Winners think in terms of how much they can lose. Losers focus on how much they can win.
The goal here By end of the book, I hope you see the correlation ofgeometric patterns to the ratios and proportions illustrated. It is going to be as simple as I can make it for you. Should you want more elaborate reading material it will be listed in the bibliography. The material here has proved exciting to me and my fellow traders who also sub- scribe to this approach to the market. In my opinion, it answers the question "can there he order in Ihe chaos of the market?
One more thought about the square root number from the golden mean. This is hands down the best book on cycles I ever read. There were only copies sold in The remainder were destroyed by Prentice Hall due to lack of interest. The book has re- cently been republished by Ruff Publishing An excellent choice for every library. There are a lot of charts in this book.
I know of no other way to illustrate these concepts. Charts were selected from all areas, from commodities to the Dow Jones Stocks. Several different time frames were Selected because these patterns are found in all time frames. Do not be disappointed if you do not see the traditional Elliott Wave pattern labeling.
It is not neccesary when you use short term pattern recognition. What is important is the ratio and proportion of each wave, frankly, I never felt too comfortable about exactly identifying the precise Elliott Wave count. This was brought to my attention most vividl y several years ago at my trad- ing house in Pismo Beach, California. They both came up with different Elliott Wave counts. They humbly admitted that they were both right! And these are two of the best technicians I have ever met.
Bryce introduced the techni- cian to the true geometry of the market, with his software program and book, Wave Trader. I count him as one of my very good friends and 1 will always be indebted to him. Although Elliot t Wave devotees may cringe at this thought, you need not be overly concerned with wave labeling, but the square roots and thei r reciprocals can go a long way to analyse a wave in the true Elliott sense.
Usually, when I write about a subject. There are great many technicians all over the world who could and should be mentioned here. There are even more private traders of equal or greater skill that no one ever hears about. It is out of respect for these un- known artists that I will refrain from men- tioning names. I would have left someone out anyway and if it would have been a friend of mine-—well, you know the feel- ing!
The material presented here is not to be considered as a trading system. It cannot stand alone. It is an approach to trading the markets. Judgement and discipline are necessary.
And if they can be mastered, the trader has the potential for financial free- dom. True freedom can only come with discipline. Rut h Mille r sent me a note. I posted the note to my trading monitor and forgot about it until October.
After October soybean oil went off the board near the exact price she pre- dicted, I gave her a call. She still lived in Indiana and had a soybean and corn farm- ing operation. Her husband was my first soybean hedge account when I was a bro- ker at Drexel Burnham. During our phone conversations, Ruth revealed to me that she had unearthed pardon the pun some in- credibly accurate cycles.
She said that they were based on planetary movements.
You are the reason I am still here to enjoy all of my friends and family. Everyone deserves to have someone love them this much in a lifetime. However, my studies always included an extensive examination of Fi- bonacci numbers. My pragmatic position on anything I learned is that it I could not use what I was studying to help in trading, then I was not interested in pursuing it any further. Ifthismaterialstimulatesyourinterest inthe subject, then introducing you to it will be worthwhile. A word of caution, this material is based on the probabilities of trading. The art of trading is one of risk management.
Larry Pesavento | Financial Astrology
Click here to visit his web site, and see below for some of his insights. Pesavento also discussed his use of Mercury being combust the Sun, which is similar to a conjunction of Mercury with the Sun. True node of the Moon — The true node of the moon is the only part of the solar system that turns counterclockwise. When it moves from retrograde to direct or vice versa, it will affect prices.
Larry Pesavento - Fibonacci Ratios With Pattern Recognition [Traders pdf
In fact, Wyckoff, Elliott, Gann were originally introduced to me years earlier by my friend Bill Sourbey, who was my true mentor. Sadly, you misrepresented yourself from the start. But had you actually done the work, you would have realized that people such as Arthur Merrill, J. Hurst and several others from the ss preceded these people. All of your ideas came from Bryce Gilmore anyway and his Wave Trader software. The answer is that you did not know because you were bankrupt! I have the bankruptcy report and anyone can look up your credit profile to see the truth.