Everything is a 1-2-3

Price moves away from a Beginning Point. That is the First Primary Swing, the ‘1’. It stops at an Ending Point and turns back — the Secondary Swing, the ‘2’. That correction must stop before it re-crosses where the ‘1’ began; if it doesn’t, nothing is correcting, the trend is reversing.

Then price resumes, and the Second Primary Swing must exceed the ‘1’’s Ending Point. That break is what creates the 1-2-3. Until it happens you have two swings and a hope.

Goodman’s shorthand for the sequence is Line, Test, Exceed. A trend is nothing more than these overlapping, one after another.

Once a 1-2-3 has formed, it stops being three swings and becomes one. That single unit is the ‘1’ of a larger matrix, which will build its own ‘2’ and its own ‘3’. This is why Goodman works on a five-minute chart and a weekly chart with the same vocabulary.

It is also where the trade is. A Setup is a completed 1-2-3 followed by a new 1-2 in progress. You are not predicting the ‘3’. You are waiting for the structure to declare itself and then riding the swing it has already earned.

Goodman’s own definition, from the CODEX: a Goodman Wave is a market 1-2-3 that propagates more than one time.

Every setup begins with context: a long, relatively straight prior move called the Jumbo. It crosses your screen. It has little movement against itself. And it is where you start looking — not at the 1-2-3, but at the swing behind it.

Goodman buys off down Jumbos and sells off up Jumbos. You begin at the Jumbo’s Ending Point and watch for price to move in the opposite direction. The 1-2-3 that forms there must be small: from the ‘1’’s Beginning Point to the ‘3’’s Ending Point should measure less than 25% of the Jumbo. Past that, the Room to Run rule says the chart is a bust — move on to another Jumbo.

The reward for waiting: the propagated ‘3’ heads, at least initially, for the Tipping Point of the Jumbo itself. That is your first target, and it was visible before you entered.

Cancel, Carryover, Compensate. Whatever price misses or overshoots at the halfway point of the ‘1’ — the Tipping Point, where buyers and sellers of that swing sit in theoretical balance — gets made up at the end of the ‘3’.

Miss the TP by some amount and the ‘3’ tends to land short of the measured move by that same amount: the Under count. Overshoot it and the ‘3’ runs past: the Over count. Frequently price takes the Under first, retraces, then takes the Over.

This is where your targets come from. Not a round number, not a Fibonacci level — an arithmetic consequence of what the correction already did.

Two plain swings cannot intersect. At least one participant has to be a matrix, so it is swing-plus-matrix or matrix-plus-matrix that gives you a bona fide intersection. Propagation intersections occur at the secondary swing’s ending point or the second primary swing’s ending point.

When the ending point of a 1-2-3 coincides with the Tipping Point of a larger 1-2-3, that is the one Charlie found most interesting. Two ending points on one price make it a Double; three make it a Triple.