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22: Case study course on applications of mathematical probability and morphology to prices
The Action and Reaction (or AR) Rule: This Rule was first applied to price trend changes by the late Roger Babson. He adapted it to price movements from Sir Isaac Newton’s scientific law that states “Action and Reaction are equal and opposite”. He stated that his fortune of over $50,000,000 was due to this principle. In gratitude to Newton, he established the Gravity Research Foundation now located at New Boston, N.H., and went to England where he was able to buy Newton’s former home. He then transported the study where Newton made his discoveries to the Babson Business Institute, and you may visit and sit in the this beautifully paneled room at Wellesley Hills in Babson Park. The writer, your director was presented with some apples and said to the descendents of the apple tree that Newton is said to have been sitting under when the fall of an apple started his train of thought leading to the important laws that he developed, relative to gravitation.
You can realise that a principle such as this AR Rule that produces such profits is worthy of your attention and understanding. For once you understand how you can apply this Rule to make money for yourself you are on the road to an independent fortune of your own. Colleges have endeavored to impart the essential knowledge for you to qualify for a profession or job through which you may make a living. But do you know of any college that had given any courses on how to make money ? Mr. Hunt of Texas, reportedly one of the world’s richest men has stated that college education does not seem to be of much help in fortune building. Mr. Ling of Ling Vought Temco who made the largest check of over 400 million was a Drop-out. Ted Warren who made a fortune in Commodities never finished grammar school. All these men needed was common sense and a desire to become wealthy. So too may you through these Course Studies apply these principles proven to be the important ones by men who have become affluent, principles never elaborated anywhere except by this Course you are now taking.
In order for you to use this AR Rule mathematically, you need a center line about which to measure the Action of the past, with the Reaction in the future. Such is the marvelous order in any random movements such as occur in price movements in free markets, that you will find many lines can be used as center lines, To name a few of these, the fan lines you have just studied in the “Horn of Plenty” studies charts are one example. Try it yourself on any chart and see how this Rule will enable you to sell after rises and buy after declines. The zero pivot to the four pivot is another useful center line. Lines drawn through three or more Pivots are important center lines to measure from, the more pivots such a line passes through the greater its reliability. Each line through two or more gaps in price ranges is another. Your Course will furnish you with examples of each of these center lines, but now you should test your understanding of how to draw these AR lines on each of the final lines on your “Horn of Plenty” charts. To avoid confusion from too many lines on each chart, put tracing paper over it and draw the AR lines about each rib of the fans. See how you are provided with the knowledge of buying profitably after declines, and selling profitably after rises. Loss comes when you don’t. The method of doing this you find in the “Course method to Increase Your Holding”, and the accompanying International Minerals and Chemical Chart (IGL).
Alan H. Andrews, Director