Dow Cycle Update

Updated chart on the Dow Cycle from the previous post.  Price rose straight in to the time line and dropped as expected.  

Cycles on the Dow Jones

I've been keeping this one pretty close to the vest for most of the year.  It's a series of cycles worked out on a daily chart of the Dow Jones Industrial using a very simple technique I came up with a few years ago.  Each colored vertical line is a cycle.  They've been pretty spot on and to the bar.  

The yellow wavy line forecast hasn't turned much but when it does, it too, has been spot on.  That forecast is topping out and there's a vertical line coming up.  A major turn or a minor one?  Only time (and price) will tell.

My hockey and hedge fund manager buddy is always laughing at me giving me a hard time and asking me what the market's going to do.  2 weeks ago I told him the Dow was going long.  He laughed.  He also laughed when it panned out.  I don't know if there's anything I can do not to make him laugh.  Maybe hit him in the leg with a puck again with my wrist shot.  :)   This post is partly dedicated to him because I declined going out for drinks one night because I said I was polishing my crystal ball.  He said I should bring it along because it works.  So here it is.. my crystal ball on the Dow.  

Anywho, as the saying goes.. it's not about predicting the future.  It's about waiting for the future to arrive and trading accordingly.  Which will be the subject for the next series of posts and possibly a video.  Making forecasts is all fine and dandy but it's actual trading that makes money.  It's possible to get the forecast right and still lose money.  I've done that more times than I care to admit to.  Suffice it to say, I've also learned some valuable lessons, techniques, and caveats.  

One of the frustrating things about most market timing and cycle forecast literature is that there is rarely if any information on how to actually trade a forecast.  In fact, one author of a pricey series of books went as far as to say in his message group that if you don't know how to trade a pull-back or a reversal pattern then you don't deserve to have the books or be in trading.  So since one of the common questions I get is how to actually trade this kind of stuff, I'll show how I do it.  Which is probably not the best way and surely not the only way.  

(image is a thumbnail. click to expand)

My boy makes a trade

Two weeks ago my 8 yr old boy was watching me work out a new cycle method that is pretty good at picking market turns as well as direction. So I moved the cycle around testing the hypothesis historically and he understood the concept of it pretty well. I told him to move it to a point that projected in to the future and then tell me what direction to look for a trade. He picked a spot and then he said down look for a move down. So basically my kid forecast a down move 2 weeks in to the future.

That point arrived today and he's up 100 pips. He was pretty excited all weekend waiting for the market to open and get the trade on. He saw when it was up 20 pips and had a pretty good smile. I'm sure he'll be ecstatic to see it was up over 100 pips. I opened a small account for him and this will be a fun way to get him in to the trading game and build up his savings.

Mirror Cycle Update

Here is part 2 of the Mirror Cycle video.  Riveting, I  know!

http://www.screencast.com/t/QLsI7OZzR

I'll be doing a short video soon on dialing down a cycle from the daily to the 5 min. Stay tuned.

Mirror Cycles

One of the concepts I've been trading for a while is that of the mirror cycle.  Many times it's pretty easy to spot where price appears to create a symmetrical pattern where price has a reflection point and there are matching highs and lows.

There are a few software packages that incorporate this concept with an indicator that basically creates a mirror of price projected forward using a closing price line.  I find that method a little messy because there are so many kinks in the line.  A few years ago I created my own indicator that uses a moving average instead of mirrored price to smooth out the line.  This works well although it does introduce lag which is inherent to moving averages in general.  Also, as with all cycle type tools, inversions are an issue to be aware of.

I've created a video that goes over how I use mirror cycles and also show a quick and dirty method to create a mirror cycle forecast and also pickup possible inversion points.  Enjoy!

Mirror Cycle Video

Back to Trading!

I took off most of the last 2 years from trading to focus on finishing up school and dealing with some issues. I pretty much lost the fire and never really gave the idea of getting back to trading any thought.

However, I was talking to a hockey buddy of mine that happens to run his own hedge fund. I really don't ever talk about my trading and hardly if ever talk about my methods outside of a few forums. After talking shop most of the night with my friend I went home and opened up a chart for the first time in about 6 months and right away saw a setup forming on the British Pound.

I've created a couple of videos on that trade and a Euro trade I took at about the same time and how they played out. I apologize for my poor enunciation and narration skills. It wasn't ever my intention to go public with these but hopefully they'll answer a lot of the questions I get emails and messages concerning how I use the techniques and practical usages of market timing. Because some of the lines are feint, you might want to view these in full screen mode.

GBP/USD: GBPUSD_Multiple_Time_Frames_Aug.2011

EUR/USD: EuroTrade