Goodman’s Swing Count System

Goodman’s Swing Count System 

Introduction and Overview

“You Can Figure the Markets, but You Can’t Figure t

he Human Race”  

The  Principles  of  Goodman’s  Swing  Count  System  were

work of Charles B. Goodman and wereneverpublished. I met Charles Goodman at the Denver, Colorado offices of Peavey and Company (later, Gelder man) in the fall of 1971. It was the occasion of my maiden voyage in the great  sea of  commodity  trading  (later,  futures).  In  1971  silver  prices  were  finally forging  ahead  to  the  $2.00/ounce  level.  A  10-cent  limit  move  in  soybeans  elicited  a full afternoon of post-mortems by traders and brokers alike. The  Peavey  office, managed by the  late  and  great  Pete  Rednor  employed  eight

brokers (later, account representatives). The broke

r for both Mr. Goodman and me 

was the    colful  -  and  patient  -  Ken  Malo.  Brokers,

  resident  professional  traders 

including Mr. Goodman  and  the  Feldman  brothers,  Stu

 and  Reef  -  and  a  regular 

contingent of retail customers drew inspiration fro

m a Trans-Lux ticker that wormed 

its way across a long, narrow library table in the 

back of the office. Most impressive 

was  a  large  clacker  board  quote  system  covering  alm

ost  the  entire  front  office wall. 

This  electro-mechanical  quotation  behemoth  made  lou

d  clacking  sounds  (thus its 

name)  each  time  an  individual  price  flipped  over  to

  reveal  an  updated  quote. Green 

and red lights flashed, denoting daily new highs  an

d lows. Pete, apart from beingan 

excellent  office  manager  was  also  a  fine  showman  us

ing  the  various  stimuli  to 

encourage trading activity! 

Almost everyone made frequent reference to Charlie’

by  4-foot  sheets  of  graph  paper,  mounted  on  heavy  p

article  board  and  displayed  on 

large  easels.  No  one  ever  really  knew  what  the nume

rous  right-hand  brackets 

nt. But there was  always a  great deal of speculation! The present work finally reveals the meaning of those mysterious trading hieroglyphics. The quiet chatter of the tickertape, the loadclack

ing of the quote board, the constant ringing  of  the  telephones.  The  news  ticker  that buzzed once  for  standing  reports, twice  for  opinions  and three  times  for  ‘hot  news’, the squawk  boxes  and  Pete 

Redn or’s  authoritative  voice  booming,  ‘Merc!,  Merc!”.  What  a  spectacular  scene  it was! No wonder that this author, then a 21-year old trading Newbie would soon make commodity futures and currency trading his life’s wor

 But nothing made a greater impression on me than the work of Charles B. Goodman. He  instilled  first,  some  very  simple  ideas:  “Avoid volatile  markets  when  at  all possible”  -  “Trade  only  high  percentage  short  term ‘ducks’  ”  -  “Sit  on  your  hands, Dad,  sit  on  your  hands”.  It  didn’t  take  long  for  me  to  adopt  the  ultra-conservative ‘Belgian Dentist’ style of trading, that is - “Avoi

ding losing trades is more important 

than finding winning trades” 

The  Belgian  Dentist  approach  carried  with  me  when  I

developed  my  famous  AI 

trading  system  in  the  1980’s  -  Jonathan’s  Wave.  Eve

n  though  it  generated  48% 

annual  returns  with  a  zero  expectation  of  a  50%  dra

wdown  (according  to  Managed

Account Reports) it drove the brokers berserk becau

se it could easily go a full month 

without making a single trade! 

Charlie’s trading advice, I am certain, allowed me 

to survive the financial Baptism of 

Fire  that  destroys  most  commodity  and  currency  trad

ing  New bies  in a  matter of

months, if not weeks. 

Mr.  Goodman  was  to  be  my  one  and  only  trading  men to

r.  Over  the  decade  that 

followed he entrusted to me many, if not most of hi

s trading secrets.

To the best of my 

knowledge he shared this information on his work wi

th no one else in such detail. 

Charlie  and  I  spent  hundreds  of  hours  together  anal

yzing  the  trade  studies  from  My 

System.  We  also  analyzed  hundreds  of  other  commodit

y, currency  and  securities 

charts.  Charlie  was  happy  with  My  System  being  ‘org

anized’  in  his  mind.  But  as  a 

new  generation  technical  analyst,  I  was  anxious  to 

see  it  formalized  on  paper  and

eventually in source code on a computer. (To be hon

est this created a small amount of friction between the two of us - Charlie was dead set against formalized systems and 

believed strongly in the  psychological and money  ma

nagement elements  of trading.) 

Notwithstanding, by 1979 I was finally ready and ab

le to formally state the principles 

of My System. Because of its equal concern for pric

e measurements (parameters) and 

price   levels   interacting   together   (matrices)   I   orig

inally   renamed   My   System 

‘Para Matrix’.  My  first  investment  management  compan

y  in  the  mid-1970’s  was 

Para Matrix  Investment  Management  and  I  acted  as  bot

h  a  registered  Investment

harlie’s original My System trade studies  were  mistakenly  destroyed  shortly  after  his  death  in  1984.  What  remains  of them are the 200 or so examples I copied into Principles of ParaMatrix. The present work, Goodman’s Swing Count System (GSCS), is a reorganized re-issue

of Principles of ParaMatrix with updated charts and

a simplified nomenclature that  I 

am  sure  Charlie  would  have  appreciated;  “Keep  it  si

mple,  Dad!”  he  would  always

advise.  I’ve  also  expanded  on  Charlie’s  ideas  by  ‘f

illing  in’  some  less  formed  ideas

such as his market notation, or calculus as he refe

rred to it, and a method for charting

which I have dubbed Goodman Charting. 

Two   of   Charlie’s   less   well-defined   ideas   are   NOT   in

cluded   in   this   work:   1) 

Dependent/Scaled Interfacing and 2) Time-Based (cyc

lical) measurements. There are 

also a number of intra-swing formations I have  not

discussed. Nor does  this include 

instruction on Goodman charts or his notational cal

culus. 

My  own  direction  in  futures  and  currencies  turned  i

n  the  1980’s  to  artificial 

intelligence (Jonathan’s Wave) and in the 1990’s an

d today, artificial life and cellular 

automata (The Trend Machine).  In spite of, or perha

ps because of these complicated

‘cutting  edge’  computer  efforts  I  continue  to  view 

Goodman’s  Swing  Count  System 

(GSCS) in a very positive light. To this day, the f

irst thing I do when I see any chart 

is a quick Goodman analysis!  

GSCS is a natural ‘system’ for pursuing the conserv

ative Belgian Dentist approach to 

trading,  even  without  the  aid  of  a  computer.  This  a

rticle,  in  fact,  could  be  used  to 

make  Goodman  analysis  without  a  computer  at  all!  Bu

t  it  is  in  fact  intended  as  an 

introduction  to  the  CommTools  Analytic  Suite  GSCS  s

oftware.  That  software  is 

intended as a supplemental tool only for doing Good

man chartanalysis. 

GSCS  trade  opportunities  are  as  frequent  today  (per

haps  more  frequent)  than  they

were 40 or 50 years ago. I believe the system’s fou

ndations have well stood the test of 

time.  Patterns  today  are  no  different  than  they  wer

e  decades  ago  -  nor  are  the  twin 

human emotions - Fear and Greed - that create them.

 GSCS is an excellent method for 

finding  support  and  resistance  areas  that  no  other 

method  spots,  and  for  locating

potential

  turning  points  in  any  market.  One  of  its  best  suit

s  -  it  can  easily  integrate 

into othertrading techniques and methodologies. 

I  would  never  recommend  or  advise anyone to  use  a  1

00%  mechanical  trading system,GSCS or any other! 

Is it really a ‘system’? Depending upon your perspective GSCS is between 70% and 90% mechanical. The 

program available from CommTools, Inc represents the kernel idea of mechanizing perhaps 80% of the system.  I  now  believe  attempting  to  completely  code  Charlie’s  work  would  be inadvisable. 

Mr.  Goodman  passed  away  in  1984.  It  was  always  his desire  to  share  with  others  - although as is usually the case withtruegenius- fewwanted to listen. These days we are  ever  more bombarded  ever  more  cryptic  and  computer-dependent  software 

programs and ‘black-boxes’. Perhaps now is the time for the simple yet theoretically well-grounded ideas of GSCS to populate. The  publication of  this  brief  work  and  the  GSCS  sof

tware,  I  hope  and  pray,  would meet   with   Charlie’s   wishes.   His  work   in   extracting an   objective   and   almost

geometrically  precise  (ala  Spinoza)  trading  system out  of  a  simple  trading  rule  (the ‘50% rule’) is most remarkable. It has certainly earned him the right to be included inthe elite group of early scientific tradersincludi

ng Taylor, Elliot, Gann and Pugh.Conforming to the spirit of theoriginalMySystem, I’ve attempted to keep theoretical 

discussions and formulations to a necessary minimum

. Trade studies in Part 3 of this article must still be considered the crux of GSCS, even though I am pleased with the formalization  of  most  relevant  principles  in  Part  2 Century.discussions  and  intrigue  willfind  all  the  concepts

n where many new and fresh ideas trade study examples. Nevertheless, those who invest time in the theory of GSCS will undoubtedly discoveran area for further exploratio.  The  trader  weary  of  theoretical are waiting to be mined. In Mr. Goodman’s worldly absence, the responsibility forthis work and its contents is 

solely mine, for better or for worse.  Theoretical Overview and Definitions

The  cornerstone  of  GSCS  is  the  old  ‘50  Percent  Retracement  and Measured  Move’rule.  This  rule,  familiar  to  most  traders is almost  as  old  as  the  organized  markets themselves. It has been traced to the times when insiders manipulated railroad stocks in the 19th and  principles  delineated  in  the 

the source:- scommtools