YTE spoke with Ed Carlson about his career as a broker and technical trader that spans more than 20 years.

How and when did you first become interested in the markets?

I started in the brokerage business almost by accident. One day when I was an unemployed graduate, I spotted a Dean Witter broker at lunch, who suggested applying for a position with the company. I enjoyed the four months I spent in the office. I liked the people and the idea of discussing investments and the economy with colleagues and clients appealed to me, but the idea of cold calling for customers left me even colder. The need for a job overcame any doubts, and I decided that if they would take me, I would do my best and make it a career. As it turned out, I landed a financial services job during the biggest bull market in history.

How have you been able to educate yourself about the markets?

After 20 years as a stockbroker I had a pretty good foundation to start from but, really, that’s all it was. My real education didn’t start until I began reading the suggested reading list for the Market Technicians Association CMT exam (Chartered Market Technician). When I began reading those books I wasn’t sure I could pass the exams required of the CMT so I read all the books for all three exams before taking any of the exams. Once I finished, I decided I could pass the tests so I started reviewing the material again and 18 months later I had passed all three exams and had my CMT.

Did you make any mistakes when you first started out?

I made mistakes when I first started, yesterday, probably today and tomorrow. TA is no different than any other worthwhile endeavor in life. “Persistence and determination alone are omnipotent”. Of course in this particular endeavor we have to be careful that our mistakes don’t cost us the ability to try again.

Who has influenced your trading style?

One of the concepts central to my investing is Fibonacci confluence zones. These are used to identify support and resistance. I was first introduced to them in Connie Brown’s book Fibonacci Analysis but she gives credit to Joe DiNapoli. I was able to hunt down a copy of DiNapoli’s book Trading with DiNapoli Levels (out of print). If anyone is put off by the difficulty of Brown’s book but has an interest in confluence zones don’t give up. DiNapoli’s book looks like a child’s coloring book compared to Brown’s book. Fibonacci confluence zones don’t have to be complicated. They are worth the small amout of time necessary to learn them.

Longer term I have to tip my hat to George Lindsay. For anyone willing to spend the time to learn these methods they are well worth the time and trouble. The results of his methods are beyond good. They are so accurate at times they can be a little spooky!

Why technical analysis?

Why not? How’s the alternative been doing lately? Have you seen the consensus expectations of economists for US non-farm payrolls verus the actual numbers lately? Something has changed and the traditional investment community has found themselves unprepared. As volatility increases, tracking fear and greed using TA seems like a better way to forecast markets than the same tired fundamental approaches. There is a hunger for something different out there. People are drowning using the old methods.

Is there any one trade (win or loss) that sticks in your mind that had a profound impact on your development as a trader? What did you learn from this?

Most recently, I had an experience which has caused me to develop an axiom for trading which I’m sure none of your readers has heard before. My Lindsay analysis had given me three possible targets for a start to the bear market. July 1, August 3, and September 30. When July 1 arrived I moved my positions into cash – three trading days before the July 7 top and the end of what Lindsay calls a Sideways Movement. Rather than staying focused on that date I then chose to focus on the next two dates as possible tops to a bull market. I’ve been kicking myself ever since. Even though my accounts were in cash and avoided the downturn (thanks to Lindsay) I failed to take a short position because I was so focused on those next ‘possible tops’ in the market and was looking for a buy signal that would take the markets back up to one of those dates. I had forgotten that the odds were excellent we had already seen the beginning of the bear market. As a result my new axiom is “Don’t take your eyes of the rear-view mirror”. A bit counter-intuitive but hopefully it’s a new idea for readers.

Which markets do you trade?

I follow US equities, FXI and the NKX225, TNX – the yield on the ten-year treasury note, the Dollar, Euro, and Yen, crude oil and gold.

What makes your style/system of trading different from others?

My long-term approach uses Lindsay Time Intervals. As very few people are acquainted with Lindsay I’m sure that makes me different. Shorter-term I’ve found that “off the shelf” indicators are rarely useful enough to be consistently profitable. Once a foundation of knowledge is laid, a technician needs to make those indicators his own by constant tweaking and seeking new uses for them. I’ve reached the point where most of the short to intermediate-term indicators I use are hybrids of anything you’ve read about.

What is your number one trading rule?

When I see a convergence of cycles at the same time that price reaches a Fibonacci support or resistance zone, expect a change of trend.

Can you give an example of how George Lindsay’s ‘three peaks and a domed house’ apply to current market conditions?

About July of last year anyone and everyone who is acquainted with the 3PDh model began trying to forecast the top of the bull market as the Three Peaks and Separating Decline had become clear on the charts. Most of those using the model do not use it as part of an integrated approach using all of Lindsay’s methods as he intended. As a result they counted 221-224 days from the end of the base and decided the end of the bull market would occur on or around April 4, 2011. In hindsight, we know that was incorrect but those who were acquainted with Lindsay’s other methods knew it was impossible.

Now that the top of the bull market has come and gone the model tells us to expect a return to the bottom of the formation. A method related to the 3PDh model, the Tri-Day Method, enables us to forecast a price target. Actually I’ve come up with two targets and, so far, have been unable to pare it down to just one. They are Dow: 7,893.48/ 7,815.33 and S&P 500: 960.97/ 945.19


Ed Carlson is an independent trader, consultant, and Chartered Market Technician (CMT) based in Seattle, Washington. He spent twenty years as a stockbroker and is author of the book George Lindsay and the Art of Technical Analysis.