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THEMARKETACCELERATOR

Sofar,wehaveexaminedtheScienceofChaosandhowitrelatestotradingthestockandcommodity
markets.WeexplainedhowweuseourprimarydecisionandstrategymakerTheAlligatortofilter
outthebadtradesandtoaddontowinningtrades.TheAlligatoristhebestassetallocatorwehaveever
found.Wethenlookedathowtogetstartedinanyembryotrendonafractalbreakoutsignal.Thiskeeps
usoutofthewhiplashesinarangeboundmarketand,atthesametime,guaranteesthatwewillnotbe
leftoutofanysignificanttrendmove.Inthepreviouschapter,wesawthatwecangetgreattiming
advantages by using the momentum for signals rather than the price. This advantage comes from
knowing that momentum will always change before price. In this chapter, we are going to use a
derivatiue/integrationofthemomentumsothatwecreateanevenfurtheradvantageoverothertraders.
Imaginerollingabowlingballdownastreet.Theweightandmomentumofthebowlingballwillcause
ittocontinueonitspath.Ifthatpathencountersanuphillportionofthestreet,themomentumwillstart
slowingdown.Fromaphysicsstandpoint,theinstantitstartstoslowdownitisreallyacceleratinginthe
oppositedirection.Inotherwords,beforethepricecanchangedirection(wetraderslabelthisasatrend
change),themomentummustcometoacompletestopandturnintheoppositedirection,eitherupor
down.However,bymonitoringtheacceleration/decelerationofthemomentum,wecangetaneven
earlierwarningofwhatthemarkethasinmind.AsIpointedoutearlier,tradingthemomentumislike
readingtomorrow'sWallStreetJournalandtradingtheacceleration/deceleration(welabelthisindicator
theAC)islikereadingthedayaftertomorrow'sWallStreetJournal.Whatanadvantagetoanytrader!
THEACSIGNALS

Acceleration/Deceleration(AC)isthethirddimensionofourmarketanalysis.Rememberthattheprice
isthelastitemtochange.Beforethepricechanges,themomentumchanges:andbeforethemomentum
changesdirection,theremustbeadecelerationofmomentumuntilmomentumcomestozero.Thenit
startsacceleratingintheoppositedirection,beforethepricecanchangedirection.ThatiswhattheAC
measures,theAccelerationandDecelerationofthecurrentMomentum.TheACwillchangedirection
beforetheMomentumandMomentumwillchangedirectionbeforeprice.UnderstandingtheACasan
earlywarrlingsignalgivesycuanobvicusadvantageoverothertraders.Figure61isacondensation
oftherulesfortradingtheAC.Basically,thezerolineistheplacewherethemomentumisbalanced
withtheacceleration.IftheACisabovezero,itwillusuallybeeasierfortheaccelerationtocontinueto
moveupward(andviceversa
Figure61RuLesfortheACsignaLs.
belowzero).UnliketheAO,crossingthezerolineisnotasignal.Ilyourequipmentallowsyoutocolor
thehistogrambars,thenyouonlyneedtolookforachangeincolortoknowthatyouneedtomonitor
themarketandpossiblytakeaction.Toeliminatespuriousthinking,justremember:WiththeAC,you
cannot haveabuyifthebaris red,andyoucannothaveasellifthebarisgreen.Whenever the
momentumandaccelerationarebothinthesamedirection,themomentumisnotonlymovinginthat
directionbutisalsogainingspeedandacceleratinginthatdirection.This,ofcourse,isthebestofall

worlds:themarketisgoingyourwayandpickingupspeedatthesametime.Becausethisisavery
sensitivesignal,wewanttogiveitabitmoreroomthanwegavetheAO.CheckoutFigure61and
youwillsee,atthebottomrightcorner,howwedothat.Ifthemomentumiswithus(itisabovezero
andwearebuying,orbelowzeroandweareselling),wewanttoenteraggressivelyandweneedonly
twogreenbarsforabuy(tworedbarsforasell).Ifthemomentumisagainstus(itisbelowzeroandwe
arebuying,orabovezeroandweareselling),wewantconfirmationsowerequireoneextrabar.Inthis
case,wewouldrequirethreeredbarstosellabovethezerolineandthreegreenbarstobuybelowthe
zeroline.Let'sexaminethesesignalsmoreclosely.
ACBuyabovetheZeroLine
AllACsignalscomefromachangeinthedirectionoftheAChistogram.TheAChistogramisa5bar
simplemovingaverageofthedifferencebetweenthe5/34momentumhistogramanda5barsimple
movingaverageofthatdifference.Ifthecurrentdifferencebetweenthe5/34AOoscillatorandthe5bar
movingaverageisgreaterthantheaveragedifferenceforthelast5bars,themomentumisaccelerating.
Ifitisless,themomentuminthatdirectionisslowing.Herearethekeypointsyoushouldremember:
1.Abuysignaliscreatedwhentherearetwoconsecutivehistogrambarswithhigherhighsthanthe
mostrecentlowestlow(adownpeak).(SeeFigure62.)
2.Abuystopisplacedonetickabovethehighofthepricebar,whichcorresponds(inthesametime
frame)tothesecondhigherhigh.
Figure6zA~ouyslgnaLaDov~~IICLe~lUIlllt:.
3.Asecondbuysignalcannotbecreateduntilthehistogrammovesatleastonebarlower,creatingared
bar.Anewbuysignalcanthenbecreatedaftertwohigher(green)bars.
4.Inthesoftware,thisiseasytospotbecauseitrequiresatleastoneredbarfollowedbytwogreenbars
ontheAChistogram.
Figure63isanexampleofbuyingwhentheACisabovethezeroline.Thebarlabeled"Down
Peak"isthelowestbaronthecurrentAChistogram.Thatisfollowedbyachangeinacceleration(noted
atpoint1),andthenextbar(point2)continuestheupwardacceleration.BecausetheAcceleratoris
abovethezeroline,weneedonlytwohigherhighs(twogreenbars)toestablishabuysignal.Thebuyis
placedonetickabovethehighofthepricebarthatisinthesametimeframeaspoint2.Noticethatit
wasfiledontheopeninggapofthenextbar(day).Figure64showsthesamesignalonPhilipMorris
stock.Inthenextsection,wewilllookattherequirementstoplaceabuystopwhentheAcceleratoris
belowthezeroline.
ACBuybelowtheZeroLine
HowdoesthebuychangeiftheAcceleratorisbelowthezeroline?
Figure65illustratesanAcceleratorbuywhentheAcceleratorisbelowthezeroline.Thismeans
thatthemomentumisacceleratingup(whichisthesameasthedownwardmomentumslowingdownas
itfalls)againstthecurrentmomentum.Thisissimilartowhenyouareapproachingatrafficlightand
putonthebrakes.Yourmomentumisstillforwardbutitisslowingdown.Fromaphysicsstandpoint,
you are really accelerating in the opposite direction. Here are the AC rules for buying when the
histogramis"below"thezeroline
1.Abuysignaliscreatedwhenthehistogramforms three barsthathavehigherhighsthanthemost
recentlowestlow(adownpeak).Allthreemustbegreenbars.

2.Abuystopisplacedonetickabovethehighofthepricebarwhichcorresponds(inthesametime
segment)tothethirdhigherhigh.
3.Inoursoftware,thisiseasytospotbecauseitrequiresatleastoneredbarfollowedbythreegreen
barsontheAChistogram.
Figure66showsthebuysignalwhentheACisbelowthezeroline.Here,ittakesthreegreenbars
becausethemomentumisagainstus,asdeterminedbytheAC'sbeingbelowthezeroline.Ourbuystop
wouldbeonetickabovethehighofthepricebarthatcorrespondstothesametimeperiodasthethird
higherhighontheAC.BoththecoffeeandtheIntelCorporationcharts(Figures66and6?)sho~va
buywhelltheACisbelowthezerolin~.Rememberthatittakesabase(BinFigure67),whichmustbe
themostrecenthistogramlowplusthreehigherlows.Theeasiestwaytoseethisistoprogramyour
chartingsoftwaresothatanupmoveinthehistogramiscoloredgreenandadownmoveiscoloredred.
Thenyou
Figure67ACbuysigna~whentheACisbe~owthezero~ineInteLCorporation.
onlyhavetocountthreegreenbarsbelowthezerolineandyouhaveasignal.Thisbringsuptwo
questions:
1.IscrossingthezerolineontheACasignal,asitisontheAO?Answer:No.
2.Whateffectdoescrossingthezerolinehaveonthebuyandsellsignals?
ThesearetheACrulesforbuyingwhenthehistogramis"crossing"thezerolinefrombelowtoabove
(negativetopositive):
1.AbuysignaliscreatediftheAChistogramdownpeakisbelowthezerolineandcrossesthelineon
thesecondorthirdbarafterthedownpeak.Whenthathappensandthecurrent"indicator"barinthe
histogramisabovethezeroline,youneedonlytwohigherhighs.(SeeFigure68.)
Figure68Buyingwhenthehistogramis"crossing"thezeroLine.
2.ITISIMPORTANTTOUNDERSTANDTHATCROSSINGTHEZEROLINEISNOTASIGNAL
ONTHEACHISTOGRAM.(CrossingthezerolineisasignalonlyontheAOchart.)
3.Crossingthezerolineonthehistogramchartonlychangesthenumberofgreenbars(higherhighs)
thatyouneedforabuysignal.Thereasonbehindreducingthenumberofhistogrambarsaftercrossing
thezerolineisthatthemomentumisnowinyourfavorandyouwanttogetinoraddtoyourpositionas
quicklyaspossible.
Figure69illustrateswhathappenswhentheACcrossesthezerolineandhowitaffectsthenumberof
barsnecessarytocreateabuyorsellsignal.Crossingthezerolineisnotasignal.However,crossingthe
zerolinemaychangethenumberofhistogrambarsneededtocreateasignal.Figure69,weonlyneed
twohigherhighsbecausethesecondhigherhighisabovethezeroline.Itdoesnotmatterwherethe
otherpartsofthesignalconstructionmightbe;whatmattersiswherethecurrentbarisinrelationtothe
momentum.Becausebar2isabovethezeroline,themomentumisnowinourfavorforabuy.
Figure610showsasimilarsetupinaCocaColastockchart.Rememberthatallofthesesignals
workequallywellonbothstocksandcommodities.
ACSELLSIGNALS

Next,wewillexaminetheACsellsignals.Thereareonlytwo,plusonespecialcase:

1.Sellingbelowthezeroline.
2.Sellingabovethezeroline.
3.Sellingwhenthehistogramiscrossingthezeroline.
ACSellbelowtheZeroLine
Figure611showsaschematicofhowtheACsellsignaliscreatedbytheAChistogram'shaving
twoconsecutivelowerlowsbelowthezeroline.ThesearetheACrulesforsellingwhenthehistogram
isbelowthezeroline:
1.Asellsignaliscreatedwhentherearetwoconsecutivebarswithlowerlowsfromthemostrecent
highesthigh(anuppeak).
2.Asellstopisplacedonetickbelowthelowofthepricebar,whichcorresponds(inthesametime
sequence)tothesecondlowerlow.
3.Inthesoftware,thisiseasytospotbecauseitrequiresatleastonegreenbarfollowedbytworedbars
ontheAChistogram.
InFigure612,weseethatitonlytakestwolowerlowsonthehistogramtocreateasellsignal.Thisis
truebecauseweareintunewiththemomentum,asevidencedbytheAChistogram'sbeingbelowthe
histogramzeroline.Figure613isasimilarillustrationforastockchart.
Figure613SeLLsignaLwhenthehistogramisbeLowthezeroLineTommyHiLfigerStock.
ACSellabovetheZeroLine
Therulesforsellingwhenthehistogramisabovethezerolineare:
1.Asellsignaliscreatedwhenthehistogramformsthreebarsthathaveconsecutivelylowerhighs
followingthemostrecenthighesthigh(anuppeak).
2.Asellstopisplacedonetickbelowthelowofthepricebarthatcorresponds(inthesametime
segment)tothethirdlowerlowonthehistogram.
3.Inthesoftware,thisiseasytospotsinceitrequiresatleastonegreenbarfollowedbythreeredbars
ontheAChistogram.Thissamesoftwarewillalsoindicatethesellstopwiththeexactorderpriceonthe
pricechartitself.
WewilluseFigure614todemonstratethissellsignal.Achangeinaccelerationisrequired,as
notedonbar1,andthatisfollowedbytwobarswithlowerhighs.Becausethehistogramisabovethe
zeroline,whichmeansthatmomentumisstillup,itrequiresthreeredbars(barsarecoloredredifthey
arelowerthantheprecedinghistogrambar).Now,aswedidinthebuysection,let'sexaminewhat
happensasthehistogramiscrossingthezeroline.NoticeinFigure616thattherearetwosellsignals
abovethehistogram'szeroline.Points(A)and(B)requireanupwardpeakfollowedbythreelower
highs.Next,let'scombinethissamehistogramwiththeFedExchartthatgeneratedthesesignals(Figure
617).Thefirstsellsignalwasnotfollowedbylowerlowsinprice,andthemomentumcontinueddown,
givingustwopossiblebluelightspecials,labeled(B)and(C).Thefirstsellwasfilledatpoint(D).The
secondAOsellabovethezerolinesignalwasformedatpoint(E)andfilledatpoint(F).Becauseofthe
sizeofthischart,youmayhavetorefertoFigure616toseeclearlythattherewerethreedownbarson
thehistogram.Therulesforsellingwhenthehistogramiscrossingthezerolinefromabovetobelow
(positivetonegative)are:

1.AsellsignaliscreatediftheAChistogramuppeakisabovethezerolineandcrossesthelineonthe
secondorthirdbaraftertheuppeak.Whenthathappensandthecurrent"indicator"barinthehistogram
isbelowthezeroline,youneedonlytwolowerlows(redbars).(SeeFigure618).
2.ITISIMPORTANTTOUNDERSTANDTHATCROSSINGTHEZEROLINEISNOTASIGNAL
ONTHEACHISTOGRAM.(CrossingthezerolineisasignalonlyontheAOhistogram.)
3.CrossingthezerolineontheAChistogramonlychangesthenumberofredbars(lowerlows)thatyou
needforasellsignal.Again,thereasonbehindreducingthenumberofhistogrambarsaftercrossingthe
zeroiineis:Momentumisnowinyourfavor,andyouwanttogetinoraddtoyourpositionasquickly
aspossible.
Figure618isaschematicofhowcrossingthezerolineaffectstheACsellsignal.
Rgure618SeLLingwhenthehistogramiscrossingthezeroLinefromabovetobeLow(positiveto
negative).
Figure619showsthehighesthistogrambaras"UpPeak."Thatbarisfollowedbythebarlabeled"1,"
whichisabovethehistogramzeroline.Bar"2"isbelowthezerolineandthusneedsonlyatotaloftwo
lowerhighsafterthehistogrampeak.InFigure620,thehistogramisenlargedsothatitiseasiertoread.
InFigure620,youcanseetheeffectoftheAC'scrossingthezeroline:itcutsthenumberofbars
neededtocreateasellsignal.Thereasoningbehindthisvariationisthatifthehistogrambarisbelowthe
histogramzeroline,momentumisnowdownandinyourfavor,sogetinpromptly.Next,placethis
histogrambackwiththepricecharttoseehowtheyfittogetherforprofitableopportunities.InFigure6
21,youcanseethatpricebar(A)becomesasellsignalbecausethehistogramhascrossedthezeroline,
whichmeansthatthemomentumisinfavorofthesellerssowewanttogetinpromptly.Thatnow
requiresonlytwolowerlowsfromthemostrecentpeak.Thissignalwasfilledatpoint(B).Another
similarsignalonthischart,atpoint(C),wasfilledatpoint(D).
Figure619AspeciaLcase:WhentheAChistogramiscrossingthezeroLinecrudeoiL.
Wehavenowcoveredthetwobuysignalsandthetwosellsignals,andwehaveillustratedbya
buyandsellspecialsituationwhenthehistogrambarsarecrossingthehistogramzeroline.Forreview
purposes,theyareallpresentedinFigure622.
PRACTICEPAGES
ThissectioncontainschartsforyourpracticeinfindingACbuysandsells.Eachchartisfollowed
byanswerpagesthatshowalltheACsignals.Tryyourhandatdemonstratingyourunderstandingofthe
ACsignalsbymarkingtheonesyouseeonthepracticepageandthencheckingtheanswerpages.
Figure623isforyourpracticeinlocatingalltheACbuyandsellsignals.
Wecontinuetostronglysuggestthatyoudonotproceedfurtherwiththesesignalsuntilyoureally
understandandcanreadilylocatealltheACbuyandsellsignalswithouthesitation.Afteryouhave
finishedpracticingonFigurs623,gotootherchartsandpracticelocatingACbuyandsellsignalson
them.Onlyafteryouhaveaccomplishedandpracticedthesuggestionsaboveshouldyoumoveonto
ChapterSeven,"TradingintheZones.n
PracticePageAnswers

AsshowninFigure624,therearenineACsignalsinFigure623:
1.ThisisanACsell.Thesignalwascreatedonthethirddownbarafteranuppeak.Thesignalishiton
thefollowingbar.
2.ThisisanACsell.Thesignalwascreatedontheseconddownbarafteranuppeak.Thesignalwas
neverhitbecausetheACturneduponthenextday,whichcanceledthesellsignal.Youcannothavea
sellsignalwithacurrentgreenbarontheAOhistogram.
3.ThisisanACbuy.Thesignalwasactuallycreatedtwodaysbeforethebarmarked.Wecontinuedto
movethebuystopdownuntilthebuystopwashit,becausetheACcontinuedup.Thisisagood
exampleofabluelightspecial.
4.ThisisanACsell.Thesignalwascreatedonthethirddownbarafteranuppeak.Thesignalishiton
thefollowingbar.
5ThisisanACbuy.Thesignalwascreatedonthethirdupbarafterthedownpeak.Thesignalishiton
thefollowingday.
6.ThisisanACsell.Thissignalwascreatedonthethirddownbaraftertheuppeak.Thesignalwas
canceledonthefollowingdaybecausetheACturnedup.
7.ThisisanACbuy.Thesignalwascreatedonthesecondupbarafterthedownpeak.Thissignalwas
canceledonthefollowingdaybecausetheACturneddown.
8.ThisisanACsell.Thissignalwascreatedonthethirddownbaraftertheuppeak.Thesignalwashit
onthefollowingday.
9.ThisisanACbuy.Thesignalwascreatedonthethirdupbarafterthedownpeak.Thesignalishiton
thefollowingday.
Figure625isanotherpracticechartforfindingACbuyandsellsignals.Atthispoint,wearenottaking
intoaccounttheAlligator.OurpurposehereistobeabletolocatealltheACsignalsquicklyandeasily.
CheckyouranswersagainstFigure626.Figure627isachartofSearsstock.Seeifyoucanfindthe
validbuyand/orsellsignals,takingintoaccounttheAlligatorandthepositionoftheAChistogram.The
answerstothepracticechart(Figure627)arelistedbelow.HowmanyofthesignalsindicatedinFigure
628didyoufind?TheSearscharttakesintoaccounteverythingyouhavelearnedaboutusingthe
Alligatorandthefirstbreakoutfractal.InthefirstboxontheleftisanACbuysignal(twohigherhighs
onthehistogramafterabase)thatwastriggeredonthenextpricebar.Thesecondboxfromtheleftisan
ACsellsignal(ahighinthehistogramfollowedbythreelowerbars;itrequiredthreebecausethe
secondonewasstillabovethezeroline).Italsowastriggeredontheverynextpricebar.Thethirdbox
fromtheleftisanACbuysignalthatonlyrequiredalowfollowedbytwohigherhighsbecausethe
secondhigherhighwasabovethezeroline.
Theboxonthefarrightwascreatedbyahistogramlowfollowedbytwohigherhighs.Likethe
previous signal, it only needed two higher highs because the secondone was above the zero line.
However,noticethatthesignalwasnottriggeredbythenextpricebar.Thenextpricebar(theonethat
isinsidethebox)hadalowerhigh,andtheAChistogramcontinueduponthefollowingbar.This
createdabluelightspecial;themarketwasallowingtraderstobuythestockatalowerpricethanthe
signal.Theseareoftenthebesttradelocations.ItisveryimportanttonoteherethatallACsignalswere
nottriggered.RememberthatourfirstsignaltakenoutsidetheAlligator'smouthisalwaysafractal.
Afterthatfirstfractalistriggered,wetak_eanyandallsignalsinthatdirection.Iti~alsoimportantto
notethatifanACsignaliscreatedandtheAChistogramchangesdirectionbeforethepricebaris
triggered,thatnullifiesthesignalandwedonottakeit.Anotherquickcheckis:youcannothaveanAC
buysignalwhentheAChistogrambarisred,andyoucannothaveanACsellsignalwhentheAC

histogrambarisgreen.TheACsignalisourmostsensitiveindicatorbecauseitchangesbeforethe
momentum,andthemomentumchangesbeforetheprice.
ACTUALTRADINGEXAMPLES
Figure629showsactualtradingsignalsbeginningApril17andendingonJuly31justover
threemonthsoftradingthedailies.Noneofthesetradeswasintraday,andonlytheACsignalsare
shown.Notethatnotallthesignalsarenumbered.Thenumberedsignalsindicatetheonesthatwere
actuallyhitandgotusinonthelongside.ThosethatwereactuallyhitarelistedinTable61.
WHATYOUSHOULDKNOWATTHISPOINT
Youshouldnowknow..
1.WhatChaosreallyisandhowitgivesusanadvantageinthestockandcommoditymarkets.
2.Howtoconstruct,recognize,andusetheAlligatorforbothtradeplacementandassetallocation.We
calltheAlligatorouroddsmaker.
3.Howtorecognizebuyandsellfractalsquicklyandeasily.
4.HowtheAwesomeOscillator(AO)isplottedandhowtotradethemomentumofthemarketas
determinedbytheAO.
5.Howtoeasilylocatethethreebuysignalsandthethreesellsignals,andhowtoidentifySaucers,
TwinPeaks,andcrossingthezerolineAOsignals.
6. How to easily locate buy and sell signals above and below the zero line on the
Accelerator/Decelerator(AC).Youshouldalsounderstandhowcrossingthezerolinealters thebar
countinbuyandsellsignals.
CONCLUSION
Ifyouhaveanyproblemwithanyofthestatementsabove,pleasedonotgofurtheruntilyoureally
understandallthesignalstothispoint.Youmaywanttorevieweverythingwehavecoveredinthese
firstsixchapters.Everytimeyouseeachart,trytofindthesignals.Thekeytosuccessfultradingis
discretion,andtheAlligatoralertsusto whichsignals weshouldtrade.Ourjobatthisjunctureisto
thoroughlyunderstandeachofthesesignals.Wehavetwomoredimensions(signals)toexplore.The
nextoneisespeciallydesignedtoaddonaggressivelywheneveryourMAP(momentum,acceleration,
andprice)saysyouhaveeverythinggoingyourway.Y.Vecall ittrcdingirt.~7e~on2.Itisalsoour
MAPfGrmaximizin~profitswhenthemarketisgoingourway.Itisnotunusualtodoubleyourprofits
byusingmyzonetradingtechniques.Athletestalkaboutplayinginthezone;wewillbetradinginour
zone.Enjoy!Inthenextchapter,youwilllearnhowtoincreaseyourprofitssubstantiallyinanytrend
run.
Youshouldnowknowhowtorecognizeandtrade:
TheAlli~ator
TheFra~bl
TheAw~sQmeOsc~llator