Most of the lesson posts in 50YearTrader have been about Goodman Wave Theory (GWT). I will now offer a few short lessons in the Goodman Method of Trading (GMT): the theory and the praxis, if you indulge me a Nimzowitschian moment.
Goodman Wave Theory in a Nutshell
1) Wait for a Jumbo Swing. 2) Wait for a 1-2-3 at the end of the Jumbo. 3) Wait for the 1-2-3 to propagate into a larger 1-2. 4) Trade the propagated “3” swing.
That’s it! This basic setup is further qualified using the three GWT principles of propagation, intersection and 3-C, as well as inside and outside Overlays.
The Goodman Method of Trading
The GMT has three key features. It is 1) an inductive process, 2) “proactive with the charts,” and 3) risk-averse: “I’d rather miss a good trade than make a bad trade.”
Poor Charlie! He spent 11 years getting that across to me. A patient soul he was, indeed. But he knew I’d ultimately need to discover it for myself.
Today’s Mini-Lesson: Time Hash
Here we see a Jumbo followed by a 1-2. The area between the red hashed line and the green hashed line is Time Hash.
What we want to see next is a “3” swing, a move above B. A move below A indicates a continuation of the Jumbo.
Any movement between the two points is Time Hash. No matter how exciting the action therein may be, it is irrelevant to the Goodman trader. We just sit on our hands until one point or the other is breached. “What do I see now, what do I want to see next?” You are done for now with this chart. Move on to the next chart, little doggies! Continuing to watch it will only lead to hallucination and, almost certainly, a bad trade.
The next GMT mini-lesson will be on the Goodman Smoothie, focusing on GMT as an inductive method.
This post is educational commentary. It is not investment advice. Trading futures and FX involves substantial risk of loss.
Good Trading!
Michael Duane Archer
Related Reading
- The Goodman Smoothie: A Mini-Lesson on the Goodman Method
- The Goodman Wave Theory Paradigm in a Nutshell
- Goodmanisms: Charlie Goodman’s Sayings on Trading, Explained
Keep Learning the Goodman Way
If this article was useful, these are the next steps:
- The Method: propagation, intersection and the 3-C Principle, drawn plate by plate.
- The Goodman Library: the books, from Goodman for Grasshoppers to The Goodman 6 & 6.
- The Trader’s Playbook: the Molokai setup in one printed, numbered volume.
- Mentoring: work one-on-one with the authors.