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QUICK HARMONIC TRADER

FIBONACCI TRADER INDICATORS ADD-ON MANUAL

This add-on package will allow you to access an extended set of technical tools for the QuickHarmonic Trader. These tools are some of the favorite indicators found in Robert Krausz’sFibonacci Trader program. In this manual, we will describe each indicator and its intendedpurpose, with sample charts for each.

This add-on package consists of four indicators. The Dynamic Trio, Hi-Lo Activator, and TripleSwitch indicators are found only in the Fibonacci Trader program. William Blau’s ErgodicCandlestick Oscillator (ECO) is a favorite indicator among Fibonacci Trader users, so we haveincluded it in this add-on as a bonus.

To apply an indicator to your chart, simply click on Indicators in the Main Menu to access theIndicator window. In the Indicator window, you can simply double-click on any indicator in thelower list to add it to the upper list, or highlight the indicator and click on ADD. If you wish tochange the indicator’s default values, you can highlight it on the lower list and click on the EDITbutton at the bottom of the window to access the default edit window. All of these functions aredescribed in greater detail in your Quick Harmonic Trader Users Manual, Indicator section.

Some of these indicators are calculated using a length value. In the description, reference ismade to the length value. For each indicator, the length value is predefined, but can bemodified to slow down or speed up the response time of an indicator.

Following are brief descriptions and examples of the Fibonacci Trader indicators.

DYNAMIC TRIO

The Dynamic Trio is a proprietary indicator developed by Robert Krausz. This indicator is anexcellent trend definition indicator. It is among the indicators that we call “trend tradingindicators”, which simply means that it defines not only the trend of the market, but also yourentry points within that trend. It can also function well in defining your risk level while you are in aposition. This indicator is very forgiving, as a trend trading indicator, when compared to the Hi-LoActivator and Triple Switch. It tends to allow the market more room to breathe within a trend, so itis perhaps the best indicator to use for longer term traders. If you are trading a market using thedaily chart, it is also recommended that you create a weekly chart of the same symbol, so thatyou can use the same indicator to define the weekly trend as well. In doing so, you can temperyour activity when trading against the weekly trend, and be more aggressive when trading in thesame direction as the weekly trend. You might also choose to use a momentum indicator, suchas W. Blau’s ECO, to define the longer term trend.

DEFAULT INPUTS: INPUT DESCRIPTION:Wait For Close Y This input is only active on Real-Time programs, it is not active

in the QHT program, as it is an End of Day program only.By number of ticks 2 This input defines the amount of ticks the market must close above or

below the indicator to cause it to “flip”. If you are trading stocks, and using a decimal unit, where a tick is equal to .01 (apenny), you might want to use a 25 tick setting (a quarter) to trigger a flip. If it is an extremely volatile stock, you may want to increase this setting to 50 or even 100. It is important to understand what a “tick” is. A tick is the smallest unit of trade for a particular market.

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Line 1 Color Red This is the color for the “short stop” line. This is the line that defines when the market is in uptrend.

Line 1 Style Solid This simply means the line is solid, rather than dashedLine 2 Color Green This is the color for the “long stop” line. This is the line that defines

when the market is in downtrend.Line 2 Style SolidSub Chart 1 Sub Chart 1 means that the indicator plots directly over the price bars.Draw Type Step The indicator is drawn in a “step” formation.X-position 20 The current position of the indicator is plotted 20 pixels ahead of the

current price bar, so it appears as a “leading indicator”.Symbol None There is no symbol used to define the position of the indicator.

The chart below shows the Dynamic Trio applied to a daily price chart for FCEL. Marked on thechart are 8 trade entry points, where the indicator “flipped” it’s direction. In this case, I have useda flip value of 50 ticks, or 50 cents.

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If we look at the same stock using a weekly chart with the Dynamic Trio applied, we see that theweekly trend was up for almost this entire period. So, if we used that as a filter for our dailytrades, we would have filtered out all short trades during this time frame. We would have filteredout trades numbered 2, 4 and 6 on the daily chart, all of which were losing, or break even trades.The latest short signal, numbered 8, came at the level where the weekly dynamic trio was turningshort, and is currently a winning trade.

If you are a buy-side trader only, you might want to trade only when the weekly trend is up.

HI-LO ACTIVATOR

The Hi-Lo Activator is also a trend trading indicator, and functions in exactly the same fashion asthe Dynamic Trio. The Hi-Lo Activator tends to be a bit faster in response than the Dynamic Trio,so it may be a better indicator for shorter term traders. Again, you can use the higher time frameto define the longer term trend as a filter.

DEFAULT INPUTS:Length (Value) 3By Number of Ticks 2Line 1 Color Red (Long stop)Line 1 Style SolidLine 2 Color Green (Short stop)Line 2 Style SolidSubchart 1Draw type StepX position 0Symbol Circle 2

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On the following chart, we have the Hi-Lo Activator on the Daily chart for FCEL. Note that we had8 trades defined during this period of time, starting on 8/1/2000. This indicator is obviously abetter choice than the Dynamic Trio for this market, as it tends to hug the speed of the priceaction more closely, allowing you faster entries into the short term trends.

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If we then look at the Weekly chart with the Hi-Lo Activator, and use that as a trend qualificationfor our trades, we see that many trades were disqualified by the higher time frame’s trend. Shorttrades #2 and #4, and long trade #7 were all disqualified. 4 of the remaining 5 trades wereprofitable. 2 of the 3 disqualified trades were losers, so we have increased the percentage ofprofitable trades by using the weekly indicator to define the trend.

TRIPLE SWITCH

The Triple Switch, like both of the indicators we have just examined, is also a trend tradingindicator, but it tends to be the fastest of the 3 in reaction time. Let’s perform the sameexamination.

DEFAULT INPUTS:Length (Value) 3By Number of Ticks 2Line 1 Color Red (Long stop)Line 1 Style SolidLine 2 Color Green (Short stop)Line 2 Style SolidSubchart 1Draw type StepX position 0Symbol Circle 2

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You can see in this Daily chart of FCEL, with the Triple Switch applied, 10 trades were generatedin the same time frame we have been examining. This indicator is a bit too fast for this market.The Dynamic Trio, the Hi-Lo Activator and the Triple Switch can quickly be examined on anychart to find the one which fits the market the best. Again, lets now look at the higher time frameto see what happens when we filter our trades with the Weekly trend.

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Using the weekly indicator as a filter, we would have disqualified trades numbered 1, 2, 4, 7, and9. We would have reduced our trades to a total of 5. The remaining 5 trades were all profitable.So, even though this indicator on the daily bars only is a little to fast, if we bring in the idea ofusing the higher time frame as a qualifier for trend direction, we have arrived at the mostprofitable system.

WILLIAM BLAU’S ERGODIC CANDLESTICK OSCILLATOR

We call this one the ECO for short, but it will be listed on the indicator list at W. Blau’s ErgodicCandlestick Oscillator. The ECO is a momentum indicator. It is based on candlestick bars, andtakes into account the size and direction of the candlestick “body”. We have found it to be a verygood momentum indicator, and especially smooth, because it is unaffected by gaps in price,unlike many other momentum indicators.

We like to use this indicator as an additional trend confirmation tool, or as an alternate trenddefinition tool, in place of a weekly indicator.

The simplest way of using the indicator is simply to define the trend based on which side of the“0” line the indicator is located on. If the indicator is above “0”, then the trend is up. If theindicator is below “0” then the trend is down.

You can add an additional qualifier by noting the “slope” of the indicator, and the crossing pointsof the slow and fast lines. Some like to use the slope alone to define trend direction. If the linesare sloping upward, the trend is up. Alternately, if the lines are sloping downward, the trend isdown. In this view, the point where the lines “cross” is the point where the trend changes.

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DEFAULT INPUTS:Length (Value) 26Line 1 Color WhiteLine 1 Style SolidLine 2 Color BlueLine 2 Style SolidSubchart 4Draw type LineX position 0Symbol Circle 2

In the next chart we have added a Hi-Lo Activator and an ECO together to define the tradabletrend. For this example, we will simply use the rule that when the ECO is above the “0” line, thetrend is up, and we are qualified to buy on new signals from the Hi-Lo Activator. When the ECOis below the “0” line, the trend is down, and we are qualified only to sell on new short signals fromthe Hi-Lo Activator. In other words, when the ECO is above 0, we are not allowed to take shortsignals, and when the ECO is below 0, we are not allowed to take long signals.

On this chart, I have noted the two points where the trend changed, as defined by the ECO. Wehad two buy side trades while the ECO trend was up, and two sell side trades while the ECO

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trend was down. All 4 trades were profitable. The ECO kept us from trading the retracementsagainst the trend.One last word about indicators. We like to use indicators from multiple time frames to qualifytrades. The Fibonacci Trader and Fibonacci/Galactic Trader programs have the ability to showindicators from multiple time frames on a single chart, but the Quick Harmonic Trader plotsindicators in a single time frame only. I have devised a simple method of getting around this. Ifyou place an indicator on a daily chart, for example, the Hi-Lo Activator, you will note that it usesa length value to calculate. The default for this particular indicator is 3 periods (on a daily chart,that means the calculation is based on 3 days). If we were looking at a weekly chart, it would be3 weeks. Since there are 15 trading days in 3 weeks; so, you can see the weekly value of the Hi-Lo Activator on a Daily chart by simply editing the length value to 15. On the following chart, Ihave illustrated this concept. You see two Hi-Lo Activators, one with the daily length value of 3,and the other with the weekly length value of 15. I have changed the colors for the weeklyindicator so that they can easily be distinguished. In this chart, we use the weekly indicator todefine the trend, thus obtaining the same results that we illustrated earlier in this manual, butwithout the need to view both the daily and weekly charts. Viola!

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Of course, this approach will only work with indicators that are calculated using a length value.For example, you will not be able to apply this concept with the Dynamic Trio indicator, because itdoes not use a length value in it’s calculation.