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Authoritarianism: The Complete Socionomic Study

Authoritarianism: The Complete Socionomic Study

By Alan Hall, originally published in the April 2010 and May 2010 Socionomists

Part 1: The Wave Principle Governs Fear and The Social Desire to Submit Mention authoritarianism and most people imagine its ultimate incarnation—a dictator wielding top-down control. The socionomic perspective, however, paints a fuller picture.

Authoritarianism begins with a negative social mood trend, which in turn spawns a desire among some to submit to authority and among others to coerce their fellows to submit. At the same time, still others, caught up in the same emotional climate, battle against authoritarianism.

We forecast that a continuing long-term trend toward negative social mood will produce increasingly authoritarian—and anti-authoritarian—impulses and eventually lead to the appearance of severe authoritarian regimes around the globe.

A Society’s Definition of Normal Constantly Changes To begin our study, we must look at how a society determines what is socially, politically and morally “Normal.” Different large-degree mood trends create dramatically different perceptions of normalcy, even in the same country. Positive mood trends produce increasing confidence and consensus; negative mood trends produce fear, anger, polarization, discord and challenges to the status quo. Chapter 14 of The Wave Principle of Human Social Behavior (HSB, p. 227-228) says:

A waxing positive social mood appears to correlate with a collective increase in concord, inclusion, a desire for power over nature … . A waxing negative social mood appears to correlate with a collective increase in discord, exclusion, a desire for power over people … .1

In the United States, for example, the massive 1950s-1960s Cycle wave III bull market featured broad agreement on many basic values and norms. Increasing inclusionism ushered Alaska and Hawaii into statehood in 1959, and society’s desire to express its power over nature led to, among other massive ambitions, the moon landings in the late 1960s and early 1970s. In contrast, today—10 years into a Grand Supercycle-degree bear market—U.S. society’s perception of itself and its future has radically changed. Increasing discord and exclusionism is evident in calls for secession, threats of violence against members of Congress and Arizona’s recent passage of highly restrictive anti-immigration legislation. As for power over nature: opposition to genetically modified foods and to carbon-producing industry show the opposite impulse, and NASA’s share of the federal budget is one-tenth what it was in the 1950s.

Around the globe, the desire for power over nature is yielding to the desire for power over people. Segments of society are increasingly accepting this as “normal”; others are battling against that view.

Introducing the Socionomic Nolan Chart Social polarization is not limited to the one-dimensional political spectrum of left versus right. It also includes the opposing views of anarchy and authoritarianism. The first image in Figure 1 is our adaptation of the Nolan Chart, a simple diagram that depicts these complex political dynamics. David Nolan posits that left-wing liberalism advocates personal freedom, and that right-wing conservatism advocates economic freedom; libertarians advocate both, and authoritarians neither. We added the inner diamond to Nolan’s picture to show the distinction between the consensus that occurs during a bull trend and the polarization of views during a bear.

A Society’s Perception of “Normal” Is Constantly Changing

Figure 1

Images 2 through 6 in Figure 1 portray how a society’s perception of what is “normal” shifts over time.

  1. Snapshot of bull market, with the consensus view arbitrarily positioned in the center.
  2. Beginning of Bear Market: Polarization begins. People abandon the consensus view.
  3. Mood decline accelerates: Polarization increases, as do calls for separation, opposition and destruction of the status quo. Society’s sense for what is “normal” loses definition.
  4. Majorities form and one prevails: Society’s new normal gels nearer one of the corners.
  5. Mood trend bottoms, reverses: A new bull market begins. Polarization decreases. Partisans begin to embrace compromise and re-form a centrist view.
  6. Bull market under way: Society desires peace and cooperation. Optimism and willingness to compromise prevail. “Normal” may begin a slow shift, but even as the perception moves, society maintains consensus.

A large-degree mood reversal can accomplish a dislocation of views in a relatively short time. For example, the 1929-1932 Supercycle wave (IV) mood decline set up a dramatic change in the United States’ consensus view of “normal.” First, the trend toward negative mood polarized society and diffused consensus, throwing “normal” into flux. Once the bottom formed, the majority began to emphasize unity and self-sacrifice in the face of external enemies; a new centrist-diamond “normal” coalesced, lower and further left than before. This new normal persisted into the 1950s bull market, when U.S. citizens displayed unusual compliance with reduced economic freedom via record-high tax rates. The consensus held for 50 years, with moderate Democrats Kennedy and Clinton and moderate Republicans Eisenhower, Nixon and Bush reflecting the middle-of-the-road political viewpoint.

Bull markets generate consensus even in societies that are very near a Nolan extreme. For instance, the Supercycle wave (IV) of 1929-1932 caused Soviet society to polarize as well. Amid rising factionalism in 1929, Joseph Stalin attempted a hard-left, super-authoritarian move to collectivize agriculture. The authoritarian/anti-authoritarian conflict took a heavy toll:

Farmers considered this policy a return to serfdom. They resisted and destroyed about half the U.S.S.R.’s ­livestock—some 55 million horses and cows—whereupon Stalin responded by sending about a million families into exile. This conflict, and a catastrophic decline in grain production, exacerbated the famine of 1932-1933 that killed between five and 10 million people. —Global Market Perspective, “A Socionomic Study of Russia,” November 20072

After Supercycle wave (IV) bottomed, the Soviet centrist diamond re-formed near the repressive authoritarian pole. Then from this unlikely position, the bullish mood behind Supercycle wave (V) unified Soviet society enough that it achieved remarkable success in its space program. The Soviets orbited the first satellite, Sputnik, in 1957; put the first man into space in 1961; and landed the first spacecraft on the moon in 1966.

In contrast, declining mood currently has one of the world’s leading democracies implementing authoritarian practices. In 2004, the British government’s own information commissioner warned that the country risks “sleepwalking into a surveillance society.” Since then surveillance has only increased, while the nation debates whether to accept the scrutiny.

Large-degree bear markets can lead to calls for freedom, authoritarianism, left-leaning and rightist solutions. Where a country ends up is unpredictable. What is predictable is that societies tend to look far different after major mood declines than they did before them.

Bear Markets Encourage Authoritarianism Past issues note that the stock market is our best measure of social mood. Our studies also show that the complete U.S. stock record, with British data preceding, is an excellent meter of long term global mood. Such is the case with our study of authoritarianism. (For more on why U.S. stocks reflect global mood, see “A Socionomic Study of Russia,” November 2007 Global Market Perspective; call our offices for details.)

Figure 2 shows that over the past 300 years, major bear markets hosted most of the notable examples of authoritarianism. There are incidents of authoritarianism in bull markets, but they are fewer and smaller. Let’s review the history:

Grand Supercycle wave & produced both an increasingly authoritarian Great Britain and the American Revolution as a response.

In Supercycle wave (I), Cycle wave IV included the United States’ Tariff of 1828. The South called it the “Tariff of Abominations” because it supported the North’s industry at the expense of the South’s agriculture. The September 2001 issue of The Elliott Wave Theorist explains the forecasting value of fourth waves:

The negative themes in “wave four” within the “five waves up” presage those that will dominate, more dramatically and on a much bigger scale, in the ensuing “three waves down.” In this case, wave IV discord foreshadowed the coming extreme polarization of Supercycle wave (II), which led to the American Civil War.3

Historians associate the 1850s—the second leg down of Supercycle (II)—with the Authoritarian Decade in Great Britain, Austria and Prussia. In Europe Reshaped 1848-1878, J.A.S. Grenville writes:

The decade of the 1850s presents an extraordinary contrast to the turmoil of the ‘hungry forties’ … . The state was paternalist and authoritarian.4

The authoritarian impulse was not limited to those countries. In the United States, Lincoln suspended the writ of habeas corpus, which allows appeal against unlawful imprisonment, and dismissed the states’ understanding that they could secede from the Union at will. In France, Napoleon III revived and extended Napoleon I’s authoritarian nationalism. His police state tactics—spies, arrests, political trials and restrictions on freedom of speech, assembly and the press—“provided the old ruling classes of Europe with a new model in politics”  (A History of Western Society, McKay, Hill, Buckler).

Later, Cycle wave IV of Supercycle (III) brought the initial rise of the authoritarian left via the Bolsheviks in the 1917 Russian Revolution. To a lesser degree, it also brought authoritarianism to the United States. Sociologist Robert Nisbet wrote:

The West’s first real experience with totalitarianism—political absolutism extended into every possible area of culture and society, education, religion, industry, the arts, local community and family included, with a kind of terror always waiting in the wings—came with the American war state under [President Woodrow] Wilson.5

The American Protective League—a quarter-million volunteer vigilantes authorized by the U.S. attorney general—spied on, assaulted, detained and otherwise violated the civil rights of citizens. They were joined by:

A mammoth web of patriotic organizations enlisting thousands of volunteer spies … . The Liberty League, the American Defense Society, the Home Defense League, the National Security League, the Anti-Yellow Dog League … the Boy Spies of America, the American Anti-Anarchy Association, and the Sedition Slammers.6

In Liberal Fascism, Jonah Goldberg detailed that during the late teens, the Wilson Administration censored, harassed and threatened the American press. In Abrams v. United States (1919), the Supreme Court upheld a sedition verdict and a sentence of 20 years in prison for five Russian immigrants who tossed anti-American leaflets from the windows of buildings in New York City. The government also imprisoned U.S. citizens for verbalizing opposition. For example,

In Waterbury, Conn., a salesman was sentenced to six months in jail for remarking that Lenin was “one of the brainiest” of the world’s leaders.7

The larger decline of Supercycle wave (IV) brought more extreme authoritarianism. Millions of Russians died as a result of Stalin’s collectivization of agriculture and Purges. Fascists seized power and began militarizing Italy, Germany and Japan. Authoritarianism increased in America as well, but less so than in other countries. HSB (p. 284) observes:

One manifestation of [the] mood extremity was the increased enrollment in and disruptive activity by the Communist Party in the U.S. In contrast to the German experience, however, the most extreme political forces never achieved political control … .8

The Franklin Delano Roosevelt administration flirted with dictatorship, redistributed wealth and made extraordinary efforts to “pack” the Supreme Court.

The next major bearish period, Cycle wave II (1945-48), echoed Supercycle (IV). It launched the careers of two of history’s most notable authoritarians: Kim Il Sung of North Korea in 1948 and Mao Zedong of the People’s Republic of China in 1949. Kim imposed isolation and economic deprivation on North Korea. Mao’s authoritarian Great Leap Forward (1958-1961) led directly to the largest famine in history. This particular Mao program came during a bull phase in much of the world. But Mao’s subsequent and more overtly violent Cultural Revolution (1966-1976) came during Cycle wave IV. It killed as many as 30 million people.

Just before Mao began his bloody Cultural Revolution in China, Nicolae Ceauşescu assumed power in Romania. The year was 1965 and a long bull market (Cycle wave III) was nearing an end. Early on, Ceauşescu enjoyed popular support for his independent nationalism and challenges to Soviet dominance. But as Cycle wave IV matured, Ceauşescu began to emulate the totalitarian systems of China, North Korea and North Vietnam. He expanded government control into many areas of Romanian life, outlawing contraception and divorce, for instance. He starved Romania’s economic growth and controlled the media to create an idealized and heroic public image of himself.

In 1975, with Cycle wave IV still under way, Pol Pot led the Cambodian Khmer Rouge movement to power, imposing agrarian collectivism, civilian relocations, slave labor and executions. His genocides killed as many as 2.5 million Cambodians.

In Iran, the shah’s increasingly despotic reign ended with the even more authoritarian Islamic Revolution in January 1979. A few months later, Saddam Hussein used security forces to assume control of the government in nearby Iraq and quickly suppressed all political opposition. In 1980—as wave IV was finally grinding to its end—Saddam invaded Iran. The eight-year conflict, among the longest and deadliest wars of the 20th century, ended in stalemate, with estimates of up to 1 million dead.

Such actions are among the fruits of major declines in social mood.

Resurging Authoritarianism Today Another bear market began in 2000, and authoritarianism is waxing along with it.

Figure 3

Liberal democracies, which feature constitutional protections of individual rights from government power, have risen in concert with the Dow Jones Industrial Average since the early 1800s. That trend appears to be faltering. Figure 3 is from the February 2010 issue of The Elliott Wave Financial Forecast (EWFF), which observed:

Just as stocks struggled higher in the 2000s, the number of liberated democracies slowed dramatically. A slight tick down, from 90 to 89 “free” countries in 2009, confirms what we said here last month: The social effects of the bear market are mostly still to come. … According to Freedom House, 2009 was “marked by intensified repression against human defenders and activists in 40 countries.” It was the fourth straight year of increased repression, “the longest stretch of civil rights setbacks” in 40 years.9

Freedom House is an international organization that researches and advocates democracy, political freedom and human rights. Its director of research, Arch Puddington, wrote “Civil Society Under Threat,” published in the spring 2009 issue of Harvard International Review. It begins with this warning:

After several decades of consistent progress, the state of global freedom has entered a period of stagnation and possibly even decline … . Among the principal targets of the new authoritarianism is civil society. The result has been a notable reversal for freedom of association throughout much of the world.10

After a long trend toward positive social mood, authoritarianism’s popularity hit bottom in the 1990s, when the Soviet Union collapsed and political scientist Francis Fukuyama proclaimed “the universalization of Western liberal democracy as the final form of human government.” Now, just a decade later, authoritarianism is resurgent.

Redefining Freedom Both Russia and China have histories of extreme authoritarianism, and both countries are now attempting to recast democracy as a blend of free markets and authoritarian politics. British historian Timothy Garton Ash calls authoritarian capitalism “the biggest potential ideological competitor to liberal democratic capitalism since the end of communism.” A June 2009 Foreign Policy Magazine article, “Authoritarianism’s New Wave,” describes the countries’ impressive new global media tactics:

Today’s authoritarian regimes are undermining demo­cracy in updated, sophisticated, and lavishly funded ways … . The Kremlin has launched Russia Today, a multimillion-dollar television venture … . ­Beijing has reportedly set aside at least $6 billion for these media expansion efforts.11

Meanwhile, many liberal democracies themselves are becoming increasingly authoritarian. In October 2001, President George W. Bush signed the USA Patriot Act, giving law enforcement officials unprecedented access to Americans’ telephone and electronic communications. The Bush administration itself has been widely criticized for suspending habeas corpus and employing torture in off-shore prisons such as Guantanamo Bay and Abu Ghraib.

The British think tank Adam Smith Institute reports that the U.K., a nation with less than one percent of the world’s population, possesses one quarter of the world’s security cameras. Ironically, Britain in February introduced a new law—Section 76 of the Counter-Terrorism Act 2008—that can send those who photograph police to jail for 10 years.

A graphic example of Britain’s nascent authoritarianism, reminiscent of Orwell’s 1984, is this poster, which first appeared throughout London in October 2002. It advises citizens to feel secure under the surveillance. In a more recent example, the popular British radio show TalkSport broadcast a government anti-terrorism advertisement—available on YouTube—encouraging citizens to be suspicious of neighbors who keep to themselves, close their curtains or use cash instead of credit cards. The ad ominously counsels, “If you suspect it, report it.”

Some authoritarian tragedies begin this way. Robert Gellately, author of The Gestapo and German Society: Enforcing Racial Policy 1933-45, writes of his surprise upon reading a collection of 19,000 Gestapo files that Nazi officers were unable to burn before the Allies arrived:

I had found a shocking fact. It wasn’t the secret police who were doing this wide-scale surveillance and hiding on every street corner. It was the ordinary German people who were informing on their neighbors … . business partners turning in associates to gain full ownership; jealous boyfriends informing on rival suitors; neighbors betraying entire families who chronically left shared bathrooms unclean or who occupied desirable apartments.12

Electronic Freedom A Princeton University Internet expert says, “The inconvenient truth is that authoritarianism is adapting to the Internet age” (St. Louis Today, March 4, 2010). In addition to providing governments a cheap online channel for distributing propaganda, the Internet makes it easier for them to spy on their own citizens. Here are just a few examples.

In February, U.S. President Barack Obama extended three provisions of the Patriot Act, allowing the government “to obtain roving wiretaps over multiple communication devices, seize suspects’ records without their knowledge … and conduct surveillance of someone deemed suspicious” (Christian Science Monitor, March 1, 2010). The Obama administration also recently unveiled a new computer intrusion detection system called Einstein 3 to guard against cyber attacks. The Department of Homeland Security insists the system does not compromise privacy: “No agency traffic is collected or retained by US-CERT unless it is associated with a cyber threat.” As cyber threats increase with the bear market, however, so will the private information associated with them, likely widening Einstein’s scope.

Also in February, the French National Assembly passed a bill to “allow unprecedented control over the Internet … . a new level of censorship and surveillance” (Der Spiegel February 17, 2010).  The bill creates “one of the toughest censorship regimes of any robust democracy in the Western hemisphere” (Ars Technica, February 17, 2010).

Google Inc. notes, “The number of countries that censor the Internet has grown from a handful eight years ago to more than 40 today…”

You can continue reading this article — and access 3 full years of still-relevant Socionomist archives — in just one easy step >>

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QE Infinity

Official portrait of Federal Reserve Chairman ...

Official portrait of Federal Reserve Chairman Ben Bernanke. (Photo credit: Wikipedia)

EVERY single major stock market peak has at some point crashed under the weight of the outstanding DEBT that was used to fuel the rise – at some point, whether its sooner or later the debt built up with the aid of this man (& other central bankers from countries around the world) will cause markets to fall – the hard part is knowing WHEN.

I have a provisional time cycle in place for May 2013 (give or take a couple of months either side, so it will be interesting to see how things pan out around those times

As always many thanks to EWI for producing these great articles from research not usually found in the main stream media.


The Hovis Trader

Bernanke’s Bigger Bubble: QE-3 and the Coming Economic Crash
Why monetarist theory is flawed 
October 18, 2012

By Elliott Wave International

Federal Reserve Chairman Ben Bernanke really means it this time.

He will rescue the economy.

Ben S. Bernanke for the first time pledged that the Federal Reserve will buy bonds until the economy gets closer to his goals … . The central bank yesterday announced its third round of large-scale asset purchases since 2008, with the difference that it didn’t set any limit on the ultimate amount it would buy or the duration of the program. … Bernanke is “going to fight and fight until he sees a real improvement in the economy,” said a co-head of global economics research at [a major bank].” He believes quantitative easing can help the economy, so he’ll just keep at it until there’s a real turn in the economy.”

Bloomberg, Sept. 14

But we’ve all heard the definition of insanity: doing the same thing over and over and expecting a different result.

Why should we think QE-3 will work when the previous two failed? (Don’t think they failed? Then ask yourself why we need a third one.)

Granted, this round of quantitative easing appears open-ended. And it includes a pledge to purchase $40 billion a month in mortgage-backed securities. But high interest rates don’t explain the sluggish residential real estate market. Home purchases are slow for the same reason that many business owners haven’t expanded. A Sept. 12 CNNMoney article quotes a former Fed economist:

“Businesses are not hesitant to invest and hire because interest rates are too high – they’re hesitant because of the uncertainty surrounding their future prospects.”

When the August jobless rate fell to 8.1%, the widely reported reason was because so many people gave up looking for work. U.S. business startups are at record lows. Food stamp rolls recently skyrocketed. Several U.S. municipalities are declaring bankruptcy. Ratings service Moody’s just warned of a possible U.S. downgrade. And the national debt just surpassed $16 trillion.

Monetary policy will not fix what ails the economy. Robert Prechter explains:

Monetarist theory holds that each new dollar created can support many new dollars’ worth of IOUs throughout the banking system through re-depositing and re-lending, a process known as the “multiplier effect”…. Every aspect of this theory is flawed, from the assumption that credit is fundamentally good for the economy and should always expand to the bedrock theoretical assumption that human society is a machine where physics equations apply. Waves of social mood have no place in monetarist theory, but they can play havoc with the monetarists’ supposed machine when they reach extremes or undergo unforeseen (what other kind is there?) reversals.

The Elliott Wave Theorist, September 2011

Few people foresee a major economic reversal just ahead. The fact that Fed policy has become “QE Infinity” (it already has a nickname) tells us that something is badly wrong with the economy. And that something is a massive credit bubble

Monetary policy cannot make the global credit bubble simply vanish. Only a deflationary crash can do that. The chart below reveals why.

Look how fast the debt deflation unfolded in 1929-1932.

Learn what EWI expects regarding today’s much bigger credit bubble.

See more charts and read insightful commentary that will help you position yourself now for what’s to come next.

The herd keeps looking for intervention by government entities to aid their investing decisions. It’s time to break away from the herd and start investing independently. EWI is here to help …

Learn to Think IndependentlyYou’ll get some of the most groundbreaking and eye-opening reports ever published in Elliott Wave International’s 30-year history; you’ll also get new analysis, forecasts and commentary to help you think independently in today’s tumultuous market.Download Your Free 50-Page Independent Investor eBook Now

This article was syndicated by Elliott Wave International and was originally published under the headline Bernanke’s Bigger Bubble: QE-3 and the Coming Economic Crash. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

THT’s Market Education – Lesson 6

Lesson 5 we looked at Risk:Reward ratio and viewed an example of a 1:2 R:R, this fits into the video on Probabilities and how it all fits together – you know that with a 50% Win:Loss ratio and a 1:2 Risk:Reward ratio you will win in the markets (you still need a valid set-up but so far we’ve not even looked at set-ups, that all happens in a later video, as of now set-ups aren’t too important)

Dealing with LOSSES

How do you handle losses when it goes wrong?

Here’s Video 6:

Hint:  Its a pure mental game, some of you will be able to tolerate more losses than others.  If your chosen trading set-up provides a win:loss ratio of 30% then you have to be able to handle the losing trades, if you can’t you need to find a suitable trading method that provides you with a higher win:loss ratio which is no easy feat, especially if your dominant personality suits that of a set-up which obtains less than 50% success rate!

It takes time to find yourself to, most people do this by trading off the bat and trying to find the solution as they progress.

Happy learning

The Hovis Trader

THT’s Market Education – Lesson 5

This lesson has a quick and brief look at what you need to think about and consider following on from probabilities and rules.

Remember your trading set-up might give you a larger R:R than 1:2 – mine does!  But the CONCEPT you need to think about never changes regardless of your R:R

We also look at % of trading accounts risked per trade – this is only touched upon as I plan to do an in depth video covering this area later on.

Here’s Lesson 5:

Whatever you do, don’t get fixated on your R:R – if normally it returns 1:4 you have to be prepared for it to only return 1:1 when a 1:4 R:R is not on offer from the market and you can never know for certain when that will be!

Happy learning

The Hovis Trader

Fibonacci – Introduction

Hi All,

This is probably my most fav subject, Fibonacci is everywhere, this is an Intro into the subject, there’s more books on the subject that I recommend on my Recommended Resources bookshop.

Nobody knows the complete truth about how exactly Fibonacci fits into the markets but very often it’s clearly visible to see the growth pattern emerge and complete and it’s why I incorporate it into my trading strategy.

Gann never really made reference to it but he did say that the markets grow according to natural law, but the puzzle is why he failed to use it because I’m fairly certain he would have known about it seen as it was centuries old and he looked at everything mathematical in his quest to understand the markets.

I am in the midst of deeply researching Fibonacci and the factors it has within the markets, this research is many months away from being complete but once I’ve completed it I will release it as generic posts and videos.

To get you started on the road, the great Pythagoras, centuries ago had the 5 starred pentagram as his symbol of the “brotherhood” this symbol is littered with Fibonacci ratios which is presumably why he used it!  Many people see that particular pentagram symbol as evil, I don’t believe in that sort of thing and only see the mathematical relationships it holds per line.


The Hovis Trader (courtesy of Elliott Wave International)

Fibonacci in Nature: The Golden Ratio and the Golden Spiral The more you learn about Fibonacci, the more amazed you will be at its importance October 10, 2012

By Elliott Wave International

If you’ve studied the financial markets, even for a short time, you’ve probably heard the term “Fibonacci numbers.” The ratios and relationships derived from this mathematical sequence are applied to the markets to help determine targets and retracement levels.

Did you know that Fibonacci numbers are found in nature as well? In fact, we can see examples of the Fibonacci sequence all around us, from the ebb and flow of ocean tides to the shape of a seashell. Even our human bodies are examples of Fibonacci. Read more about the fascinating phenomenon of Fibonacci in nature.

Let’s start with a refresher on Fibonacci numbers. If we start at 0 and then go to the next whole integer number, which is 1, and add 0 to 1, that gives us the second 1. If we then take that number 1 and add it again to the previous number, which is of course 1, we have 1 plus 1 equals 2. If we add 2 to its previous number of 1, then 1 plus 2 gives us 3, and so on. 2 plus 3 gives us 5, and we can do this all the way to infinity. This series of numbers, and the way we arrive at these numbers, is called the Fibonacci sequence. We refer to a series of numbers derived this way as Fibonacci numbers.

We can go back to the beginning and divide one number by its adjacent number – so 1�1 is 1.0, 1�2 is .5, 2�3 is .667, and so on. If we keep doing that all the way to infinity, that ratio approaches the number .618. This is called the Golden Ratio, represented by the Greek letter phi (pronounced “fie”). It is an irrational number, which means that it cannot be represented by a fraction of whole integers. The inverse of .618 is 1.618. So, in other words, if we carry the series forward and take the inverse of each of these numbers, that ratio also approaches 1.618. The Golden Ratio, .618, is the only number that will also be equal to its inverse when added to 1. So, in other words, 1 plus .618 is 1.618, and the inverse of .618 is also 1.618.

This is a diagram of the Golden Spiral. The Golden Spiral is a type of logarithmic spiral that is made up of a number of Fibonacci relationships, or more specifically, a number of Golden Ratios. For example, if we take a specific arc and divide it by its diameter, that will also give us the Golden Ratio 1.618. We can take, for example, arc WY and divide it by its diameter of WY. That produces the multiple 1.618. Certain arcs are also related by the ratio of 1.618. If we take the arc XY and divide that by arc WX, we get 1.618. If we take radius 1 (r1), compare it with the next radius of an arc that’s at a 90° angle with r1, which is r2, and divide r2 by r1, we also get 1.618.

Now here are some pictures of this Golden Spiral in various aspects of nature. For example, on the left is a whirlpool that displays the Golden Spiral and, therefore, these Fibonacci mathematical properties. We also see the Golden Spiral in the formation of hurricanes (center) and in the chambered nautilus shell (right), which also happens to be a common background that Elliott Wave International uses for a number of its presentations and graphics.

We can also see the Golden Ratio in the DNA molecule. Research has shown that if you look at the height of the DNA molecule relative to its length, it is in the proportion of .618:1. If we look at the components of the DNA molecule, there is a major groove in the left section and a minor groove in the right section. The major groove is equal to .618 of the entire length of the DNA molecule, and the minor groove is equal to .382 of the entire length.

This graphic of the human body also shows how the Golden Ratio exists in certain relationships of the human anatomy.

Learn How You Can Use Fibonacci to Improve Your TradingIf you’d like to learn more about Fibonacci and how to apply it to your trading strategy, download the entire 14-page free eBook, How You Can Use Fibonacci to Improve Your Trading.EWI Senior Tutorial Instructor Wayne Gorman explains:

  • The Golden Spiral, the Golden Ratio, and the Golden Section
  • How to use Fibonacci Ratios/Multiples in forecasting
  • How to identify market targets and turning points in the markets you trade
  • And more!

See how easy it is to use Fibonacci in your trading. Download your free eBook today >>

THT’s Market Education – Lesson 4

Lesson 3 looked at Probabilities and the Win:Loss ratio of your trading set-up/strategy

Heres Lesson 4:

High Probability wins arrive from a well focused, workable trading plan and set of rules

Happy learning

The Hovis Trader

THT’s Market Education – Lesson 3

OK Lesson 2 told you that ALL traders and Investors are GAMBLERS, this lesson proves it.

What else can we be if every single position we take is based on our best guess of the markets and it’s not based on 100% certainty?

Heres Lesson 3:

What do you think?  Find it interesting?  The sooner you accept the fact that you are gambling with every position you make the,  easier its going to be for you to accept the outcomes of the markets and the easier you will find it to enter positions, understand how important stops really are and expectations per trade.  Obviously it is critical that your set-up works and it’s up to you to figure out its win:loss ratio, expectancy & risk:reward that your set-up gives you – this means you need to keep accurate records to analyse past trades!

You’ll then see a set-up, place the trade and manage it, KNOWING that by simply repeating a winning (proven) formula/set-up over X number of trades you’ll come out on top – but NOT until you accept the stark realities of this business (which of course I contain within the progression of videos) and obviously you’ll have losing trades of which you just ACCEPT because you know you’ll control them and they’ll be LESS than your winning trades.

Also think about this:  You could have a 50% successful set-up but by cocking up and making silly mistakes you could turn it into a losing set-up – hence why its vital to have rules, follow those rules and apply those rules to every single trade you make – skipping rules means you don’t trust your set-up/trading plan, so tweak it until you do and convinced of its viability.

Hint: I personally find that I get more out of a set-up when I sit down and apply it to charts in the past, by this I mean I get a chart and go back 5 years or so and apply my set-up – I prefer to do this rather than back testing via  a computer as unless I wrote the code for the computer programme (which I can’t do anyhow) I simply do not trust the results, i prefer to examine the results trade by trade to work out whether it was a winner or not – yes it takes time, but it provides confidence in the set-up! (more on set-ups in later lessons)

Happy learning

The Hovis Trader

THT’s Market Education – Lesson 2

In Lesson 1 we looked at the concept of obtaining a straight 25% rate of return per annum and the effects compounding this up over the years – this calculation was left to the individual to experiment and play around with because this is a very personalised aspect of someones finances, we will in due course get around to looking at ways to obtain this 25% ROR, but first its essential that we understand other key concepts of the markets, because if we don’t the chances of failure are high, by understanding, applying and incorporating these concepts into your trading methodology you will reduce the risks of failure and give yourself a fighting chance – these essential aspects will be covered in separate videos in this series.

Here’s lesson 2:

After viewing and considering the accusations made in this video about traders, it is impossible to disagree as if you disagree you then ought to know a cast-iron 100% certain way to trade and make money from the markets, which of course does not exist and my accusation stands.

As always remember I’m providing you with the basis to explore and develop on your own terms and pace – I am not providing an exact step-by-step guide, if I was going to do that I’d of produced a DVD course to sell

Happy learning

The Hovis Trader

THT’s Market Education – Lesson 1

Hi All,

Check out the Video post!!!!

Welcome to the 1st video post from the Hovis Trader in this Market Education series (approx 15 videos)

Lesson 1:

Remember I am NOT a professional polished presenter, the content, concepts and strategies are the critical part.

Check out the Wealth Building Strategy page for details and examples of what 25% a year can do for your account, is 25% enough?  Go online and find a decent compound interest calculator (for free) and play around with figures to suit.

Subscribe to my You Tube channel to automatically receive new video posts as they’re posted (I’m aiming for 2-3 per week)

Too many people FAIL at this game, this education series is designed to give you the essentials to be able to trade profitably.

Hope it helps in some way

The Hovis Trader

Looking @ W.D. Gann – Part Six

I intend that this is going to be a brief look at time cycles, but when I’m writing the intro to this post I can’t see how I can make it short – apologies if it drags on.

In Gann’s courses and books he says “That TIME is the most important factor of all”.

Think about that for a minute, TIME…… If you knew when a high was due to top out or a bottom was due to make a low then you’d be able to accurately trade the markets in complete CONFIDENCE that you were going to be right – easy!  Yeah right.

This is what 1000’s of traders who’ve studied Gann are searching for they’re looking for the key in the market that tells them when a move is starting or finishing – to date I’ve yet to come across anyone who can with 100% accuracy do this.

Time Cycles

Everything in life moves in cycles, day, night, seasons, natural growth entities such as life, planets, business cycles, stock market cycles and so on

Gann in his courses mentions certain time cycles to apply to charts and consider. i.e. look back 1 year, 2 years, 3 years, 5 years, 10 years etc etc.  the reason Gann suggests this is that he is convinced markets repeat over time and the markets are just a repetitive structure/entity.  So if the markets were rising today in all the years analysed then expect todays market to rise etc.

It’s not quite that simple but that’s the message Gann was trying to get across to people, review historical data going back not just months and years but DECADES for clues as to market direction for that year based on past market action determined by his Time Cycles.

Click here to view Gann’s Financial Timetable – Notice he produced it in 1909, and has been very accurate for 100 years of not only stock market action but also social events – i.e. stirkes, wars etc!!!!!!!!!!!!! (This links into the socionomics theory by Elliott Wave International – Gann was obviously very well aware of stock market activity, Economic growth and decline & the social aspects/consequences of it all being inter-linked!

This is just one of the reasons that I state that he was a truly great investor and trader for his time as this sort of thing is hardly done in today’s markets!

*If I may add in here some analysts use “Static” Time Cycles that they discover, these cycles then suddenly disappear from view, this to me suggests that Time cycles are not therefore static as if they were we’d always be able to see them and apply.

History shows us that there was a 52 month market cycle in the 1950’s that existed for 20 odd years and in the 1970’s suddenly disappeared just as fast as it had appeared! In a static linear world this just can’t happen, so something else must drive these cycles.

Remember my Gann shortcut page @ £250 provides a fast and quick shortcut to obtaining Gann’s vital courses.

The Hovis Trader