Trading Forex Cycles

S&P 500 And a Perfect Squaring

2012-01-25T02:38:00.001-07:00

The S&P 500 is at a 7 x 7 perfect squaring on Gann Square measured to 84 units of price-time which is the square of the range in time to the 360 points that square the range in price. Interestingly, 7 * 12 = 84. So price and time are not only squaring at 7 divisions of time and 7 divisions of price, but also a factor of 12 to the square's price-time units. Major move in the works? (Images are clickable thumbnails)

Dow Jones Update

2012-01-09T22:00:00.001-07:00

Here is an update on the Dow Jones Static Cycles. The cycle lines have still maintained to the bar accuracy. Magenta to aqua has been strong on the last few instances. Magenta is coming along coinciding with a turn on the yellow cycle forecast.

Dow Cycle Update

2011-10-31T15:36:00.001-06:00

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

2011-10-23T02:32:00.000-06:00

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

2011-10-17T06:33:00.000-06:00

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

2011-10-11T22:03:00.003-06:00

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

2011-10-05T01:44:00.000-06:00

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!

2011-09-14T23:35:00.006-06:00

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

Interesting

2010-07-13T21:15:00.002-06:00

Interesting article concerning gravity.

http://www.nytimes.com/2010/07/13/science/13gravity.html?_r=1&no_interstitial

I'm currently taking a break from trading for the summer and also going through a life changing event. Should be back to trading regularly in the next few months.

Price Squaring Update

2010-05-18T01:12:00.002-06:00

Here's a quick update on the Price Squaring chart for GBP/USD. I took the low price from that first chart and used the last two digits 53. Since the 39 bar cycle was hitting, I left it up. And instead, added some simple bar counts from swing highs/lows. I thought I had a screen shot from last week when I put up the projections but I guess I didn't take one. But you'll have to take my word for it. Below is the current hit.

Uploaded with ImageShack.us

(image link)

Back to the Future

2010-05-17T00:31:00.003-06:00

One of the more interesting phenomena about the Gann Square and balancing price-time is that the cycle work backwards in time as well. When I'm squaring the range on certain time frames, the end of the range is 2 or 3 complete cycles away from the end of the square. In this case, I usually just multiply the time factor by 2 or 3. The other technique is to just move the square. If the initial square is valid to price swings in the past, then moving it to signficant highs/lows should show price reactions in kind.

The first chart is the initial square based on a range of price. Because of the time frame, the square is pretty far from the end of the range. But look at how price reacted at the end of the square. Bang on with price dropping significantly over the course of a week.

Uploaded with ImageShack.us

(image link)

Moving the square to the next high yields another interesting result.

Uploaded with ImageShack.us

(image link)

And again....

Uploaded with ImageShack.us

(image link)

And finally up to today. The end of square is a few bars out, but close enough for me (I've got other cycles hitting today so those were the main basis for my entry.)

Uploaded with ImageShack.us

(image link)

And to conclude, here is the square by multiplying the time factor by 2. A perfect squaring of price and time.

Uploaded with ImageShack.us

(image link)

So as you can see, price-time sometimes puts things in the past and then it's a matter of just getting things back to the future. I was trying to think of a "Hot Tub Time Machine" movie analogy, but wasn't able to come up with any that weren't junior high potty humor. Yes, I admit to seeing that movie.

Pound for Pound: Price Squaring on the GBPUSD

2010-05-09T10:18:00.004-06:00

I saw an article this morning doing a google search for some Pound images(article link) I'm not going to pretend to know anything about Brit politics or economics, but it's always interesting to see media explanations of market movements.

A technique I think I've mentioned on this blog is taking price and using the number to find time cycles. The technique is pretty simple and self explanatory. Just take a price number and extract cycles from it. For example if price is 102.99 you could drop the cents and just go with the whole number 102. 102 Days, hours, minutes, bars, whatever. You can also half that to get 51. Our square root it to get 10.1. If 10.1 is too small, double it, triple it, or whatever. Then maybe apply these concepts by dropping the big digits and only going with numbers left of the decimal which could be 99. Or take the last 3 digits. So for something like 1229.63 use 963.

For this example I'm going to use the last 3 digits of the high on 8/9/2009 which is 1.7039 which yields 39. Counting out a static 39 bar cycle picked up a series of lows including the most recent crash low. Ok, so it's off by a bar on the last one, but who's to say the next bar doesn't end up lower and prove the cycle correct? It could play out that price drops further over the next few bars rendering the cycle hit invalid. However, knowing that price is dropping straight into a cycle point is a good heads up to look for a possible low. In a strong down trend, the low will probably be temporary which is a good spot to pull off partial profits before looking to get back in when the trend resumes. If the cycle were picking highs in a down trend then that's when to time an entry be it an initial or add-on.

The blue square highlights a low that was off by a bar. The 2nd cycle line wasn't useful anyway because price wasn't rising or falling into it. So 4 out of 6 cycle marks have been market lows with one of them off by a bar and the most recent off bar so far.

Uploaded with ImageShack.us

(image link)

If a cycle is showing good hits, then another thing I'll do is half the cycle. In this case, 39 doesn't half very well so I just took a 39 bar cycle and moved it to the half way area. Sure enough... hits.

Uploaded with ImageShack.us

(image link)

I definitely wouldn't recommend trading this method alone. It's just a nice addition to whatever system you're using.

Mayday... Mayday... We're going down...

2010-05-08T23:05:00.004-06:00

May 6th, 2010. Wow. I was on my lunch break looking to scalp a few Euro pips during the typically quite afternoon. Then price dropped. And dropped. And dropped. I'm in a trading contest and had been up just over 50% in a few days. Got caught trying to find a bottom and gave back that 50%. Stupid. Anywho...

It's funny listening to the talking heads and writers come up with a why. The fat finger conspiracy theory is a good one. Interestingly enough, I brought up a chart I had created back in 2006. It's a Weekly DJI chart with a simple Price-Time grid like Pyrapoint. Using the impulse method I've showed recently, the Dow peaked beyond 360* of price just shy of 405*. The Mayday crash occurred beyond 360* of time just shy of 405*. I'm sure if I bring up more charts/markets/time frames, there will be a lot of confluence as well. I seriously doubt you'll ever hear about this correlation of price/time mentioned by the talking heads.

Uploaded with ImageShack.us

(image link)

Simple Cycles

2010-05-03T22:17:00.003-06:00

There's not much to this blog post. Just showing a different way to plot cycles of price. The parabolas are all identical. The last one is identical but inverted. The appearance of the cycle is pretty simple. The whole concept of the parabola is a subject for another time.

The way to find these is to just look at a chart and spot a bottom to bottom or high to high pattern. Draw in a parabola and then duplicate it going forward. Simple. Of course they won't stay valid forever, but you can also extend their validity by shifting them when they fall out of sync. There are certain numbers or vibrations that never go away. They just hide themselves occasionally. The trick is to find that number for whatever instrument and time frame you're observing.

Uploaded with ImageShack.us

(image link)

And right into containment like a good price cycle...

Uploaded with ImageShack.us

(image link)

The Psychology of Trading Time

2010-05-03T12:32:00.000-06:00

Note: This is a blog entry I had written but left in draft mode about 2 years ago. I totally forgot about it but regardless of it's age, it's still appropriate. I don't recall if I was going to show the charts I was watching at the time or not but I wouldn't have the foggiest idea what charts those would have been in the hundreds I've captured over the years.

The Psychology of Trading Time

One of the most difficult aspects of using "Time" as an indicator is not whether to buy or sell at "Time", but to NOT buy or sell at "Time". Why is this? For me it's because when I've done my work right, the left side of the chart will have hit after hit where the time markers are spot on. Even down to the minute if I drill down that far. So it's inevitable that when I see that next time marker coming up to want to lean into the pitch and swing for the fences.

But of course not all hits are good hits. Buying into resistance and selling into support are recipes for disaster regardless of whether price has made a nice move into the time marker. In baseball, a good pitcher will beat you because he knows how to work the count. You know what pitch is coming and you know not to swing at it but you do anyway and end up grounding into a double play. It does not matter that you knew what pitch was coming. It was the wrong pitch to swing at for the situation. The pitcher knows this, your coach knows this, and you know this. So you end up riding pine for the rest of the game.

Last night I bought into resistance knowingly because I was itching so bad to make a trade instead of waiting for the right setup. My time marker was a good entry... that is if I were trading the 1 min. chart looking for 10-15 pips for 10-15 minutes max. But I was so sold on my daily chart projection that I ignored a major trend line and the 45° lines. I lowered my lot size because of the risk and felt the trade was justifiable because of that.

I woke up stopped out of course. Subsequently, price dropped right on down to 360° of price and time squaring up perfect for a beauty long. But now I was gun shy. With 2 outs gone, I was sitting on a 3-2 count looking right at a hanging curve ball over the plate and I watched it drop right into the catchers glove. There went the setup I had waited 2 days for.

Now the itch was really on. I tried shorting 3 times at time to catch a retrace. In other words I was on tilt.. juggling knives.. revenge trading. 3 losses in a row. All small because I lowered my lot size even further, but stupid trades none the less. So I benched myself. Turned off the charts and went and checked out the hockey headlines.

Scalping

2010-05-02T23:57:00.003-06:00

One of the things I don't do a lot of is scalping. Mainly because I just don't have the time to sit in front of the charts for a hand full of pips at a time. I'd rather be researching or analyzing for the bigger moves. Having said that, I do find it fun at times and the similarities scalping has with sitting in a casino are plenty.

Like playing poker or counting cards in black jack, scalping is waiting for the right time and setup to put money on the line. I've used quite a few strategies/systems/methods in my 10 years of forex trading to scalp. Most of them involved a lot of indicators and were more about quick reflexes. But if you could anticipate and time when to scalp, wouldn't that make things a lot easier?

The charts below show the last scalp of the evening. For this trade, I used the all familiar Gann Square to get an idea on when/where. On the chart are also pivot points. I use pivots quite a bit for scalping mainly because I have an indicator that draws them automatically and it's part of a very simple intraday method I use for short term intraday trades. Also on the chart are some mustard colored cycles lines. I typically start the session with nothing but pivots and the cycle lines and then only look for trades when price rises or falls into the pivots. If price is rising/falling into a cycle line, that's a sign for a decent price reaction. The key is to watch for when price and time meet.

This first chart shows where I entered where price fell into a cycle line near a pivot and Gann grid vertical division line. The exit target is the dashed blue line pivot at/near the red 1x1 line and Gann vertical division line. Price had fallen back into a Gann division line which would be a good add-on signal on a larger time frame. But this pair has a pretty wide spread and even price hit the target, the profit would have been minimal or b/e. So I passed.

Uploaded with ImageShack.us

(image link)

Price ran right up to the box, but needed a second push to hit the target. You can also see on the far left where I shorted when price ran right up to a Gan division. The exit was the yellow pivot line. So as you can see, using time and price are an easy way to map out intraday (evening) trades and nail the entries/exits to the minute.

Uploaded with ImageShack.us

(image link)

Below are the trades for the day. These were demo trades testing out the platform link to www.myfxbook.com for the FXDD sponsored demo trading contest I've entered for May.

Uploaded with ImageShack.us

(image link)

Squaring the Range made Simpler?

2010-04-27T21:29:00.004-06:00

Nice range, eh? I thought I'd give an example of squaring a range that doesn't require any fancy Gann square. This method is simply taking a range or price and counting out x amount of bars. If it's a lot of bars, I'll also mark off divisions. (Essentially recreating the Gann square time levels.) I'll count of bars from the start and end of the range.

In the chart below I measured off a range of 276 pips. The reason I chose that range is because it was the first move out of the double top. Double tops/bottoms can be tricky. This time it happened to work out from the first top and I haven't worked out the second one yet.

After marking off the range of 276 pips, I then counted out 276 bars. Price fell hard right down to that time marker. A bone fide go long signal. So I waited for the bar to close and went long. Interestingly enough, 276 x 2 = 552 and price had gone 547 pips from the first stop. A near perfect time-price squaring of 276 bars of time and 276 x 2 pips.

Is this a major turn? I don't know, but at worst it's a good counter trend trade for a few pips. And that's what it's all about in the end... forecasting areas of possible/probable reaction, evaluating the trend, and then risking accordingly. In this case since I'm going against the trend, the trade amount is small with a tight stop. As of this writing, it's up 50 pips. Not too shabby.

Uploaded with ImageShack.us

If the chart doesn't show up click here.

Trading on Impulse

2010-04-25T22:29:00.005-06:00

In one of Gann's writings.. I don't recall which one.. he said something along the lines that the initial move contains the vibration of a given market. I've described the technique elsewhere in this blog when discussing using the Square of Nine. I'd like to revisit the concept because it's really the simplest thing to do and a simple technique for even the noobiest of Gann students to employ.

My buddy Soso also came to the same conclusion independently and worded it very well (considering English isn't his native tongue at that!) I've quoted this elsewhere in my blog and I think it's worth quoting again:

"If you think about it, to trade, we don't really have to arrive to the vibration factor of time through some calculations, it is also possible and much simpler through simple observation when trend changes the first 2 swings or so can tell us the vibration factor of time." - Soso Beton

So the big question is what is a vibration factor of time? I don't know exactly know what it means to Gann or by Soso, but I do know that how I do it works and works well.

The first thing is to accept the concept that price and time are equivalent the same way that Einstein says space and time are equivalent. Therefore, it doesn't matter if price moves x amount of points or x amount of distance because the units of measurement are unified. There are a lot of ways to unify price-time. Squared charts where each point of price is x minutes/days/bars seems to be the "standard". I have issues with how a lot of Gann software/authors use this approach, but that's a deeper topic I've talked about already and don't feel like talking about again.

But basically I prefer to square the range. Again, there is a post somewhere in my blog showing how to do that.

This first chart is a simple example where I had squared the range to create a Gann Square. Inside the square are a bunch of fan lines for the 1x1, 1x2, etc. diagonals from the 4 corners. For now, ignore those. The lines to pay attention to are the dark purple grid lines. I use these to measure price and time within the square. As you can see, the first impulse move up went 5 squares of price. That move in price will have an echo in time. By counting over 5 squares of time, there was a distinct change in trend almost to the bar. This wasn't quite the top but was pretty darn close. (Gann preferred to divide things by 8ths. However, I divided this square by 9ths in order for price to hit the line flush. The concept would still work for 8ths, but it's easier to count 5 exact squares of 9ths instead of 4 1/2 or 4 1/3 squares. Drawing horizontal and vertical lines through the fan intersections are a way to pick up those 1/2, 1/3, and 1/4's.)

Uploaded with ImageShack.us

Up next is an example where the impulse move wasn't substantial.. only 2 squares of 8ths, but the 2 squares of time was dead on for the end of a down move and the start of a major up move.

Uploaded with ImageShack.us

And for the third and final installment I present a chart where the moves aren't as orderly, but the technique was still valid in finding a bottom.

Uploaded with ImageShack.us

If you study the posted charts, you'll also a lot of other ways in which a Gann square and fan lines can be combined to map out paths for price. Just remember... this isn't about predicting the future. It's about knowing when the future has arrived and risking accordingly. Happy Trading.

Edit - If the charts aren't showing up, here are the links:

http://img341.imageshack.us/i/tp03apr25.gif/
http://img202.imageshack.us/i/tp02apr25.gif/
http://img687.imageshack.us/i/tp04apr25.gif/

Posting Again!

2010-04-24T22:58:00.003-06:00

I've been back to the trading game for the last few months more regularly now that I've wrapped up my degree. Started slow in Feb. with good success and then exploded into March and April with great success. But it's head check/ego check time so I'll probably be taking it a lot slower going forward.

I spent a good portion today going through about 5 years of screen shots I've taken over the years. It's pretty interesting to see how a lot of my techniques and ideas evolved. I was going to post some examples, but the laptop with all of that on there died about 15 min. ago. If I can salvage the hd, I'll post some stuff later on.

But I do have a point to make. It was interesting to see my progression from serious skeptism and doubt about esoteric type trading to doing nothing but esoteric stuff. It was also amazing to see how the trading results took a hit when I first got into the style and then how quickly the results kept getting better and better. The weakness of course being money management and trade management.

Anywho, the point.... my evolution in the style was more about removing limitations on my beliefs and assumptions. The more I removed the limiting thinking the more possibilities opened up about what is possible when looking at a naked price chart. Granted, a lot of the ideas I came up with independently had already been thought up and written about elsewhere, but I can almost guarantee had I read about those concepts prior to my paradigm shift, they would have been just words in one eye and out the other.

So having realized that, it's back to the books to find out how much I've missed out on because I was blind to the message at the time.

Coming Back Soon

2009-11-02T08:55:00.002-07:00

I've taken a long break from trading for a number of reasons.

1) My website (www.time-traders.com) blew up which killed any motivation to regularly post about trading.

2) I let my grades slip. Considering how much I'm paying for this piece paper and being so close to finishing it up it's probably a good idea not to let trading screw that up.

3) Changes on the job have left little time for much else due to increased workload, hours, and "off the job" research I've been doing to make my "on the job" time more bearable.

But now that I'm only a few months away from being done with school, it's time to start getting excited about trading again. What this means for the website is that a new version is in the works that will include online tools for calculating some of the cycles I use. There will also be a basic charting app for applying some of the cycles and also showing what markets/instruments are on my radar. These will probably be daily charts only unless someone wants to sponsor an intraday webservice price data feed.

E-Mini Player Futures Day Trading Journal: 38-Steps To Becoming A Successful Trader

2009-01-25T20:27:00.002-07:00

E-Mini Player Futures Day Trading Journal: 38-Steps To Becoming A Successful Trader

Check out the above link. Great blog article.

New Website and Blog

2009-01-23T17:48:00.004-07:00

Due to popular demand and multiple requests, I've started a web site that should provide a better interface for organizing content and posting charts. Therefore this blog will only occasionally be updated. However, I will keep it open until all of the content here can be migrated. Thanks for all of the messages and emails of support and encouragement. Happy trading and see on the other side.

http://www.time-traders.com

Gann's Square of Nine and Time Vibrations

2009-01-05T02:13:00.008-07:00

WD Gann's Number Spiral chart is probably the first thing that comes to mind when most people hear the name Gann. (It's often referred to as the Square of Nine, but I believe that's incorrect since what Gann called the Square of Nine was a numbered table of 9x9 going bottom to top and left to right and not the spiral chart most people call SQ9. Semantics but just something that bugs me. I'll use both terms interchangebly, though.)

As I mentioned in the previous post about Gann Charts other than the Square of Nine, most of the usages are mere speculation on how Gann used the tool. Saying that doesn't render the speculations invalid. Just saying that Gann never spelled it out.

Another thing that bugs me is Gann peddlers using Gann-speak selling stuff like "Using the Square of Nine to find Market Vibrations" and what not and then all they do is some basic square root work that plots out some price levels and if you're lucky they spit out some time projections that are probably more miss than hit.

Why does that bug me other than the marketing hype? Because if the Numbered Spiral chart can be used to find market vibrations in a method Gann subscribed to, then PRICE=TIME and not only would the majority of price levels be "hits" but also the majority of TIME levels as well. And when I say majority I mean 6-7 out of 8. Most peddler material will nail spot on 2 or 4 out of 8 but what good is that if you don't know which 2 or 4 are the hits. I'll also point out that 360° of time is usually a miss when it comes to the typical Sq9 formulas/usages. I will point out that in my experience 180° is almost or should be a hit, so I'll give credit there and a free tip.

But let's break this down further. There is a reason I said x out of 8. 8ths is a significant division for Gann enthusiests. 1/8 circle = 45° which is the 1x1 angle blah blah blah. So if 8ths are signficant, then each 8th of price AND time should be significant and should be significant on any time frame and range of price or time. In other words, TIME=PRICE ALWAYS and not just when we're lucky.

The problem I see is that TIME is the factor almost every Gann pedler screws up. They'll show some fancy Sq9 chart and how there was a correlation of price and time here and there but it's always describing the past. I have yet to see anyone accurately predict a turn in the future because their hit rates are 2-4 out of 8 and that's just too small of a percentage. Granted, 2-4 of those will be described dead on by the Sq9, but how do you know which 2-4 will be the hits? The answer is YOU CAN'T until you resolve PRICE AND TIME AS EQUIVLENT.

So by saying all of that tripe it begs the question how does one resolve TIME? "Oh.. well you need to use calendar days instead of trading days because time doesn't take weekends off." Ok.. so why does that only work part of the time then? And what about intraday?

I will give some Gann pedlers credit in that they'll at least say you need to find the time frame where the "vibrations" fit. But that's also like going to the store that only sells 2 or 3 pant sizes and the instructions say you need to lose or gain weight to get them to fit

The major problem there is that the trader becomes a victim to the charting software's ability or lack thereof to handle different time frames. Some packages just give you canned frames. But even if you find a good time frame match, what good is it if it isn't the time frame you like to trade? I mean, if I'm an EOD trader and the 4 min. chart is the best fit for my instrument of choice or vice versa, what good is that? How does one translate a 4 min. chart to a daily and higher time frame? When I reached this point in my first Gann work a few years ago I was ready to just ditch the Square of Nine and go back to purely squigly line trailing indicator charts because I was sick of hearing how Gann said TIME was the most important yet everything I bought was focused on navigating around the Sq9 and showing mostly price with the few instances of time.

Below is a chart where I applied a common technique of squaring a range of price. The chart is the EURUSD daily. By using a range of price and then breaking it up into 8ths and also projecting the price intervals further downward, it's easy to see how the range of price method found the price "vibration" of this chart. However, the time vibration using daily bars trading or calendar days resulted in a ginormous square that was over 4.5 years wide! Maybe that's ok for monthly charts, but that throws practicality out the window for my trading. Plus, that square is based on price = bars and not price = time. Big difference.

One way to resolve time would be to do some reduction to the ridiculous with the angles. So instead of 45° intervals, start halving until the time ranges are within reason. ie maybe 5.625° is the interval instead of 45°. At that point 45° would be the new 360° so to speak. (5.625 x 8 = 45.)

The chart below is done with a different method. Since I'm using a range of price I chose to take that range of price and use it as a multiplier for a smaller unit of time. I'll leave how I did that as an exercise for the reader. But as you can see, 6 of 7 divisions of time were swing highs/lows and there was one area marked with a rectangle that was a breakout point from a tight range. But most importantly, price=time or pretty close to it based on floating a decimal. The beauty of this method is that it's applicable to any time frame be it 1 minute charts or big frames like weekly and monthly and PRICE WILL ALWAYS BE EQUAL TO TIME.

It's also worth noting that intersections of the various angle lines picked the other swing highs/lows that didn't fall on the 8th division lines. That's a pretty good sign that the square is truely measuring market vibration.

I'd like to give credit to those that really push the envelope with the Sq9 by plotting astro on it or at least finding correlations between astro and the Sq9. Hit after hit once you start working it. Wave 59 is the best tool for this type of cyclical research.

Another note I'd like to make is that the reason for this post is in part a response to a response I made in friend's blog concerning adjusting numbers for Square of Nine calculations. I made the remark agreeing that dropping digits and floating decimals isn't the best way to go about things. But I went on to say the key thing about the Sq9 is getting time resolved. So it's only fair that I back up my assertion with a few more details.

His exellent blog is here: http://ptv-investing.com/blog/

Gann Shapes other than the Square of Nine

2008-12-21T23:28:00.012-07:00

The Square of Nine and the Hexagon are the two prominent Gann numbered "square" charts. There is an abundance of writings concerning these two tools and their usage. The majority of the writings about Gann's usage are mere speculation, although some speculators seem to have some pretty good evidence to back up their theories.

Concerning the hexagon, Square of 4, and other numbered charts; I've made an interesting observation. At a basic level, the x-agon numbered "squares" are just fancy quadratic equation calculators. ie the hexagon maps out a parabola or rate of change at one rate, the pentagon at a slower rate, the nanogon at a higher rate, etc.

These contrast from the square of nine in that the square of nine is more of a constant whereas each of the numbered squares is a variable rate. For example the spacing between 180° on the square of nine is the same regardless of where you are on the 180° line. But on an xagon, the spacing increases/decreases with each ring.

One way to view the difference is that the sq9 is the speedometer and the other numbered squares would be tachometers. Your rpm's can be different even though your speed or velocity remains the same depending on what gear you're in, whether you're ascending/descending a hill, weight load, etc.

Gann more or less explained it when he described the hexagon:

"Since everything moves in a circle and nothing moves in straight lines, this chart is to show you how the angles influence stocks at very low levels and very high levels and why stocks move faster the higher they get, because they have moved out to where the distance between the angles of 45° are so far apart that there is nothing to stop them and their moves are naturally rapid up and down."

Let's take a look at GE. GE is one of the biggest defense contractors so I chose the Pentagon shape just for poops and giggles. Instead of dividing by 4th's or 8ths like a square, the pentagon divides evenly by 5ths or 360/5 = 72°. Halving that = 36° increments. Going around the circle, the divisions would be:

0°

36°

72°

108°

144°

180°

216°

252°

288°

324°

360°

Price made a high of 42.14 on 10/02/2007 at approx. 21:30 GMT. Converting price to a 3 digit number = 421. The most recent low is 12.58 on 11/20/08 at apporx. 16:35 GMT. Converting that price to 3 digits = 125 or 126. That is a drop of 295 points. That is also 288 trading bars or 414 calendar days. 290 trading is off by a few days. But converting each day to a degree would be 288 traded days. It is also 1997 hourly bars or converted to 3 digit = 200. (Halving 36° = 18° which is where 200 falls on the 'wheel'.) Below is a chart showing the correlation between 36° increments and the numbers 421, 125, 414, 288(290), and 295.

One technique taught by some of the Gann Masters such as Ferrara, Mikula, Myles Walker, Earik Beann of Wave 59 fame, and others is to plot the locations of the planets on the squares. For example, if the Sun is at 220°, mark on the chart 220 and see if there is a correlation or aspect to either price, time, or other planets marked off on the chart.

When it comes to the hexagon and other x-agon charts, I think the correlation with mapping out planets comes into play by taking into account the point of observation of a planet's orbit. Since the planets are in elliptical orbits, the speed at which the planets travel would appear to speed up/slow down depending on your point of observation. For example if you were to be looking lengthwise at an ellipse and angled the plane of observation to be perpendicular or close to it, it would appear parabolic and the planet would appear to speed up the closer it came and slow down as it went away from you. In the next installment I'll show the planets on the pentagon and how they correlated to the big down move and picked the high/low intraday within 5 minute windows.

Links to articles about Gann numbered squares/shapes:
http://www.sacredscience.com/ferrera/ganncube.htm
http://www.wave59.com/showcase/121304.asp

Wanna see me naked?

2008-12-05T10:42:00.004-07:00

Akuma99 privileged me with the opportunity to write some guest articles on his blog. Since he's primarily a naked trader.. meaning trading with no indicators and not necessarily in the buff although I suppose those aren't mutually exclusive.. I wrote the series on using some simple time counts to provide market turn timing marks on a naked chart.

Links:
http://beginnertrader.com/blog/technical-analysis/naked-time-part-1
http://beginnertrader.com/blog/technical-analysis/naked-time-part-2
http://beginnertrader.com/blog/technical-analysis/naked-time-part-3

Be sure to check out all of Akuma's blog posts. Great stuff. Especially the MT4 programming. He's made some tools for me in the past and his work is top notch. He definitely knows his stuff. He's also been a huge inspiration considering the health battles he's one. So here's to you, Adam. Cheers. *clink*

True Market Geometry Part 2

2008-12-04T15:55:00.003-07:00

Fancy geometric patterns on the chart are all fine and dandy but the question is, "can the pattern be used as a practical tool for actually making trading decisions?" The answer is a resounding but qualified yes. While the patterns may map out paths of price and provide price and time projections, the basics of sound trade decision making still apply. Such as buy support and sell resistance. I don't recommend trading anything based on one condition alone and these patterns are no different.

The first chart started as a peak to peak measure of price that perfectly projected a swing low. From the swing low a new geometric pattern was created that essentially was a measurement of the decomposition of the cycle. In other words, the waves start to get smaller as the energy dissipates. Note how price interacted with the lines and arcs within the pattern. Interesting but nothing really sticks out as a trade until price rockets to the top of one of the circles. Now the triangle apex becomes a legitimate target of both price and time.

This next chart shows the exact same picture of price but overlayed with a pattern that was based on a low to high swing. Price interacted with lines and arcs but again, nothing too tradeable until price shot up to the boundary of one of the circles. So now price is being held by two different circles. The triangle apex on this pattern is now a legitimate target of both price and time although it is further out in time and lower in price than the previous pattern.

Now that it has been determined that price is at resistance the next step is to formulate a trading plan.

From the first chart, the line projections from the initial yellow pattern create a trading channel. Channel trading is one of my forte's and I had designed an entire multi time frame system around the concept of channel trading.

The premise of channel trading is to buy or sell when price has reached a channel boundary preferably in the direction of the channel. IE buy the bottom of an upward channel or sell the top of a downward channel. The example setup isn't ideal in that price is at the top of an upward channel. However, there are a few things that make the trade acceptable. First is the fact that circles on both charts are acting as resistance. Second is that the move up was a rocket. What goes up that fast will likely come down at at least 50% of the way most of the time. So the initial target is the middle line in the channel or the median which is also the triangulation point. The upper channel and circle also provide a good area to place a stop above.

The second chart gives a triangulation point that is pretty close to the rising trend line that price had followed previously. That trend line is a high probability target and another reason why it's worth trading against the channel of the first chart.

The Plan:
1) More than one condition indicating a turning point? - Check.
2) Identifiable price target(s)? - Check.
3) Additional indications that the price target(s) are valid? - Check.
4) Discernable and logical placement for the stop/loss? - Check.
5) Positive risk/reward ratio? - Check.

The first chart shows the entry point but not the stop which I added after the screen shot was taken.

The channel median line and triangulation point of the first chart hit spot on. Target 1 achieved. One thing to note about these triangulated points in price and time. Price doesn't always take an exact path to the point. As is shown, price actually dropped below the target area and meandered into it. It's not common for the target area to get surpassed and then price retracing back to the projected point. So it's important to have other exit criteria than just the projected point.

The triangulation point from the second chart also hit spot on. Target 2 achieved. There was positive price to oscillator divergence on a different chart (that I didn't capture) so I chose to exit.

I hope this example shows that price does truely behave in a geometric fashion and that there are some very outside the box and creative ways to apply geometry to map out price behavior.

The final part of this True Market Geometry series will show some interesting correlations between geometric patterns and price action that shows how 4 dimensions are represented in a 2 dimensional price chart.

Manual Gann Square

2008-12-02T15:40:00.008-07:00

Here are the step by step directions for creating a Gann Square manually in Metatrader 4. It's actually doable in any charting software that has trend lines and preferably a static cycle tool or bar counter.

Background
The Gann Square or Master Chart is a geometric chart dividing a square into 4th's and 3rd's horizontally, vertically, and diagonally. The standard square is typically a perfect square. IE a Square of 90 is 90 bars x 90 points. However, not all trading instruments and time frames work out to be perfect 1 to 1 price to time relationships. Moreover, applying other Gann techniques such as squaring a range of price and/or time can yield good results as well. So adjustments are perfectly allowed.

Usage
My usage of the Gann Square is to divide time and price on also create a 3rd axis in space. The vertical lines divide time, the horizontal divide price, and the angles divide space. The play is to watch price reaction at intersections of price and time, price and angles, time and angles, or all 3. Horizontals and angles will more often than not create support resistence. The 1x1 lines are the balance lines. Price tends to gravitate towards the 1x1 lines.

Construction
Constructing the Gann Square is actually really simple. No more difficult than connecting the dots. Only our dots are evenly spaced around the square.

Step 1: Determine the starting point and square size. The starting point is usually from a signicant swing high or low. For double tops/bottoms, try both and see how things look. Try to avoid picking spots out of consolidation. It's also advisable to choose a spot that has enough price action to the right to get an idea how valid the square size is as it's being built. If the first few lines added have no correlation to price action whatsoever, choose a different square size.

There are many ways to determine the square size. Gann numbers such as 360, 90, 144, 52, etc., all work well. These can be days, bars, degrees, or whatever measuring device suits your fancy. All will work because of the harmonic nature of charts. But ideally, one is chosen that fits the data profile. For example, it may not be practicle to choose a 360 hour x 360 pip square for data that swings 600-700 points in a move for the time frame. In that case, 360 hours is probably fine, but the heighth could be adjusted for the more recent price range. Or adjusted to the nearest whole circle number which would be 360 x 2 or 720. Or by degrees from the square starting point which might be 90° on the square of nine as the most appropriate price range. Again, there are no hard rules. 39 x 42 is perfectly acceptable. (Any square will work imho because anything divided evenly will yield proportion within itself. As long as the square starts from the right point, that self proportion should still correlate because price moves are nothing but various degrees of proportion.)

For this example I chose a range of price for the height. For the width I chose 360 bars. I use the MT4 cycle tool to measure out 360 bars from my swing high. In MT4 it's important to use the cycle tool because MT4's chart scaling is different on the empty space right of the price area. This creates a lot of charting issues when dealing with visually "squared" charts. If a verticle line is used, it will move out of proportion. What started out at 360 bars out will end up creaping up and up around 315 bars out as time advances. The cycle tool will stay consistent.

Step 2: Divide the square. The next step is to divide the square into 4ths. I start by taking the cycle tool and shortening up the cycle. So 360 now becomes 90 with the fourth line being the last line. From there, I draw in 45° trend lines from corner to corner. Where the 45° lines intersect the verticle lines are where the horizontal lines will go.

I also divide the square into 3rds. Add another cycle tool and adjust it to divide the square vertically. 360/3 = 120. I typically change the line style to dots or dashes. Where the 1/3 verticle lines intersect the 45° diaganol lines are where the 1/3 horizontals go. I also set these lines to dots or dashes.

Step 3: Add more angles. Additional angles are drawn in connecting the corners to the mid point of the square boundaries. In other words, from the top left corner, a line is drawn to the 4th verticle at the 2nd horizontal. Another line is drawn from the top corner to the 4th horizontal and 2nd verticle. Repeat for four corners.

Lines connecting the mid points to the other mid points are added. I usually dot or dash these. The square is now complete.

Validation
It's important to validate the square. As mentioned in step 1 it's important to have sufficient price action to the right of the square start. Ideally, it was easy to validate things as the square was built. Validation is simply observing how price reacts at horizontals as support/resistence, at verticles as price reversal/acceleration points, and at the angles as support resistence.

The chart below has highlights on where price was relating to the square. The hits aren't dead on exact in terms of support/resistance, but the first vertical line was a hit and the 2nd vertical is shaping up as a good hit. Also note that smaller squares can be created and divisions of those squares will typically yield hits. The upper left corner shows an additional division line where two angles intersect. Any intersections should always be observed as possible reaction points.

Conclusion
The Gann Square is a great tool for measuring price and time and can encompass many Gann techniques. I find the tool invaluable not only as a timing device but a device that saves time hunting down price reaction areas. I mean which is easier... glancing at a Gann Square or working up a Square of Nine? Circles and additional squares can also be added to create even more levels of harmonic proportion. I'll update as this square plays out. Based on the hits so far, this square should result in some finding some good trades.

Edit: I'd also like to add that drawing the squares by hand is a good mental exercise. It focuses the mind on a single purpose of syncing to the vibration of the chart. It also trains the eye to see proportion on a naked chart. After enough practice, you'll be able to eye ball a chart and guesstimate where all of the lines are based purely on price re-action points. The eye and mind seek harmony and proportion just as the ear seeks harmony and melody.

True Market Geometry Part 1

2008-11-25T23:32:00.000-07:00

There are multiple types of market geometry. There are geometric ratios where price and time have geometric relationships that can coincide with calculations from geometric shapes. Ala fibs, harmonic ratios that result in retracement levels, Gartly Butterflies, and what not. But one of my favorites is actual on the chart geometry.

Three basic shapes. The circle, the triangle, and the square. Sacred/contemplative geometry has used those three basic shapes to create patterns of the platonic solids throughout the ages to describe the universe physically, spiritually, and philosophically. Kind of new age'ish, but actually old age'ish.

In physics and chemistry, the platonic solids are literally three dimensional manifestations of vibration. IE, crystals, the periodic table of elements, cymatics (the image in the upper left), the solar system, etc. So why couldn't a platonic solid or pattern map out the vibration of price?

One of the concepts I've taken is that since price is visually a vibration, hand drawing the 3d representations of vibration.. ie geometric designs.. helps sync up the eye and mind to the vibration of the chart. Sort of like tapping your foot to the song that's on the radio. I also think that on a conscious level, using basic shapes in an artistic manner taps into the creative side of the brain so that the experience uses both sides of the brain. Subconsciously, I think more goes on than that, but ultimately the subconscious also becomes in sync with the experience. Maybe it's first. I don't know. Chicken or the egg. But the point is that everything gets in tune... the chart, the body by way of physically drawing the objects, the conscious, and sub conscious.

I'm going to quote a trader friend of mine from a post he made in a discussion a year ago concerning price and time relationships.

"If you think about it, to trade, we don't really have to arrive to the vibration factor of time through some calculations, it is also possible and much simpler through simple observation when trend changes the first 2 swings or so can tell us the vibration factor of time." - Soso Beton

From Soso's quote, "the first 2 swings or so can tell us the vibration factor of time". That is so powerful because a swing or two can literally map out a geometric form both mathematically and visually.

Below is an example where I started with a simple Merkaba star tetrahedron with one of the sides based on the final swing of an up move. From that shape, I derived vertical points of time where angles within the shape crossed. But the grand daddy was price and time convergence at the apex of one of on of the triangles. The lines of the star also projected out into space and time birthing another star. This new star triangulated an exact point for the swing low in both space and time. Price just barely missed being another dead on triangulation towards the termination of the star cycle. Also note the vertical lines highlighting angle crossings coinciding with price reactions.

While I've seen geometric shapes used as market timing and projection tools, I've never seen follow through on the geometric growth of the shapes and patterns themselves. I find that ironic given amount of information out there concerning growth cycles in the markets.

To really get into market geometry and ratios be sure to check out WD Gann, Michael Jenkins, and Brad Cowan.

In Part 2 I'll show a trade unfold using this type of geometry.

e=mc2

2008-11-21T10:07:00.003-07:00

Scientists prove E=MC^2 on the sub atomic level with quarks and gluons. They found 5% of the mass was matter which means 95% was space or energy. What does that have to do with trading? I don't know. But there was a statement at the bottom of the article that has everything to do with trading.

http://news.yahoo.com/s/afp/20081120/sc_afp/sciencephysicseinstein_081120235605

"For those keen to know more: the computations involve 'envisioning space and time as part of a four-dimensional crystal lattice, with discrete points spaced along columns and rows.' "

So energy and mass form a lattice structure in 4 dimensions... just like I've been trying to show that price and time do. 3 spacial plus one for motion. Again, I'll refer to Brad Cowan when it comes to the 4D structures of markets.

The crystal lattice is a good study for price-time trading. http://en.wikipedia.org/wiki/Crystal_lattice

Just a sneak peak of a series of posts coming soon....

2008-11-20T22:31:00.002-07:00

Some chart art.

Update on Euro shorts

2008-11-20T22:23:00.002-07:00

Wed's CPI or PPI or whatever news release shot upward taking out stops. I'm pretty sure a lot of people playing the triangle pattern got taken out. The spike up peaked on a timeline of one chart and bottomed on a timeline of another. On the 4H, price squared up right at 90 deg. price and time and my cycle line before continuing south to the bottom of the larger triangle trendline. 2 winners, 1 smaller loser, 1 b/e on the whole position. In hindsight, I should have closed some if not all of the position when price got in a small triangle. I knew something was up and was thinking a Ross hook might catch me on the chin which it sure did. Either way, the cycles proved to be accurate even though my execution in the end was not.

Bullseye Shot on the Euro

2008-11-15T08:48:00.003-07:00

On Thursday I shorted the Euro based on a 4h triangle forming. Normally, I don't like trading inside of consolidation, but on the 4h there is usually sufficient range for swing trading. Especially the past few weeks where the daily ranges on the Euro are over 200 pips. Initial entry was based on the trendline as well as confluence from price-time squaring analysis.

Through the Euro session into Friday, price fell into a channel on down to the 50% area and bottomed on one of my time points. A very profitable start and a good place to exit. However, the plan was to swing trade the larger pattern. I figured price would meander on back to the 23.6 or 11.4 for a setup to add on to the short. Again, being a swing trade, I wasn't too concerned about the retrace eating up the profit of the 1st position because the 4h pattern is strong.

Price congested at the 50% mark after time and there were no signals when price reached the minor time lines. Price finally busted on through the 23.6 with gusto and that made the next time marker the key time marker. I used a trend line cross on the 15 min. as a time mark which also coincided with a 13 bar count from the recent low on the 30 min. Remember, time lines are most important when price is falling or rising into them for 5-8 bars or more.

When price breaks through a key resistence/support area with gusto against the larger pattern or trend, it is many times a false breakout or pattern failure. I was not shaken out because there was still one more key Fibonacci level of resistence. Also, price had gone parabolic. I didn't draw it on the screenshots, but it's plain as day. See if you can see the parabola. Parabolas are nice setups because what goes straight up must come down in time related to the angle of ascent.

When price reached the price level right at time I didn't even wait for a closed candle. This setup is like getting AK and then flopping a full house. 11.4 and it's 88.6 opposite are relatively unknown fib ratios but they're so powerful when they hit. Combined with the 13 bar count, there is no choice but to short. Based on time, I'll be holding on for possibly 3 full trading days and watching for more price-time squaring or key levels of support to fall to add on . A pretty good ending at the end of trading Friday.

One last bite of sushi....

2008-11-13T19:08:00.001-07:00

Shorted GBPJPY at a trendline. Closed on a time line. The beauty of trading time is being able to walk away and come back when the time line is up and see how things are going. 160 pips or so. Nice way to end the day. There isn't a reversal signal yet, but I'm outta here anyway.

Another short trade

2008-11-13T15:12:00.002-07:00

Static time cycles, oscillator divergence, 360* of price, and a larger frame double bottom led to a nice trade on the GBPJPY today mid morning. Candle charts are 15m. The one showing sq9 squares is 1h.

Entry:
http://img219.imageshack.us/my.php?image=tp_70Nov13.gif
http://img219.imageshack.us/my.php?image=tp_71Nov13.gif

Exit:
http://img219.imageshack.us/my.php?image=tp_72Nov13.gif

The exit was a bit pre-mature in that I existed at the cluster of pivot levels without waiting for any kind of reversal or end of move indication.

A bit later today or tomorrow I'll post some other trades I made yesterday that show that even nailing tops and bottoms to the minute don't guarantee profitability.

Scalping Yen in the Asian Session

2008-11-11T09:59:00.008-07:00

I had some time to kill yesterday after work so I decided to scalp the USDYEN pair in the Asian session. I haven't scalped in ages so I thought it would be a nice way to break in to trading again. The Asian session is usually pretty mild so I wasn't expecting any monster moves.

I started with a 1m chart and setup a few static cycles off of some of the most recent major highs/lows. In my research, I've found that any number will work as long as it comes off of a point of change. I'll usually start with Gann or Fib numbers like 12, 13, 45, 68, 120, 144, etc. I may also divide the number of minutes in the session evenly. So for the US stock market it would be 390 minutes divided however. Forex can be 1440 for a 24 hr period or 480 for a specific session.

I didn't have a lot of time to get intricate with top down charting and analsysis so I just went with basic trend lines, channels, chart patterns, pivot points, and oscillator plays.

The first trade was based more on price hitting the top of a down sloping channel and hitting a pivot line. There was upward divergence from the oscillator and a time line had just barely hit, but I felt the pivot and trend line would be solid resistence. I waited for 2-3 candles to close to make sure price wasnt' going to push through and then went short. (Charts are clickable thumbnails.)

Price moved on down to the next pivot line and bottomed at the next time division at which time I closed the short and entered long. Normally, I wouldn't trade against a channel, but price was coming down to a lower range pivot which is usually strong enough support to get some action. Price had also pushed through the oscillator trend line.

There was some erratic action for a few bars and I took a chance adding another long when the next time division came up. The target was the next pivot line. Also, there is a cluster of 3 time points coming up.

Price achieved the target and both trades were closed. Now the task was to wait for price to drop into a time line for another chance to go long and see if price could push through the pivot line convincingly. I jumped the gun on the first opportunity and went long before the candle closed on the time line. It's best to wait for the candle to close at the earliest. It's usually best to wait one or even two candles after a time line especially if there is no discernible support/resistance. I also drew in some saw wave lines to gauge cycle overlap. That provided enough confidence to wait for the next time line to add another long.

Price moved on up through the pivot but did not break the previous highs. The saw wave showed the cycle was up as well as price rising into a division of time so I exited both positions for small profit.

All told, the trades yielded about 75 pips in just under two hours during a relatively quiet time. I wanted to stick around for another opportunity to go long and see if price was able to reach the next pivot (which it did) but the wife showed up. Either way, the first scalp session was a good example of adding some simple time cycle techniques to traditional chart analysis for picking market reaction points to the minute. I don't know if I'll make a habit of scalping since I don't like sitting around in front of charts for more than 20-30 minutes. I much prefer 20-30 minutes of analysis, set entry orders, and then coming back later to see how things played out.

I'm back

2008-11-10T09:38:00.002-07:00

I took the last year off from trading in order to focus on school and some other things. I've actually been back to watching charts for the last few months to try and get my "legs" back so to speak. In doing so I've had to re-learn quite a few techniques and figure out what the heck some of my old blog posts were even talking about. On the bright side, I've also gained a better understanding of some of the things I used to do and added some new dimensions.

One of the things I haven't done in a long time is intraday and scalp trading. I've got a whole statistical based system that did quite well for intraday and scalping but like most systems out there it doesn't do a good job accounting for time, although it does give a general ball park.

The problem with scalping and intraday is that things can happen on such a wide scale without the benefit of getting too intricate on the analysis. For example, it wouldn't be the most practical to use my new crop circle method on a 1 min. chart because it would take 10-15 min. to get the patterns right. However, by simplifiying things and just going with some static cycles along with basic price measures such as square of nine price levels, pivots, Murry Math levels, fibs, or just trendlines and support/resistence, there are plenty of spots to pick market turns on the pip and to the minute.

Intraday and scalping also present another aspect that I haven't dealt with in a while and that is trading with the poker mindset. When I say poker, I don't mean gambling. I mean sitting there making quick decisions based on a small amount of information. Folding hands ie cutting losses and moving on to the next hand.

Anywho, I'll be updating the blog shortly with some new findings.

Long Term Euro Cycle

2007-09-15T13:43:00.000-06:00

Is the Euro run over? Attached below is a weekly chart showing a Gann grid adjusted to squaring a range of time going back to Oct 2002. The closing of this past week put price right on the 360° of time and 495° of price. I would be expecting a pretty significant correction from this point pretty close to the 1.30 area in the short term. I've got 1.8280 marked off as the first target. The cycles of time have been fairly accurate and I've circled in yellow where price turned. At least within a few bars. 6/8 ain't too bad and if price turns within the next few weeks it will be 7/8 correct.

The red moving average looking thing is a price cycle forecast showing this past week as a major turning point. This price cycle shows one inversion,but the turning points were correct even though direction wasn't. The next turn isn't unitl the end of January. There is a bump around the end of November beginning of December. Again, inversions happen and I'm not sure how forecast them, but the primary key is the forecast change of direction and not necessarilly literal direction.

Below is the continuation of the last Gann Grid. Price peaked again at 56 bars and might prove to be the top for a while.

Manual Gann Grid Continued

2007-09-10T10:17:00.000-06:00

Continuing the grid from last Friday, price continued to react to the 56° of time. The high for Monday morning peaked right on the 56th bar from the previous verticle division. The high for Wednesday also peaked at 56° of time. Once a pattern has been established it's not uncommon for the same theme to play out over a good section of time.

On the first chart, the magenta vertical line shows the forecast high for time. The 2nd shows how it played out. The 3rd chart shows the high for Wed.

Idealized 9 Month Cycle

2007-09-09T00:10:00.000-06:00

There is a great article on cycles at www.decisionpoint.com. The article breaks down a nominal 8 year cycle down to an idealized 9 month cycle. Within the 9 month cycle are two phases of a 20 week cycle and 4 phases of a 10 week cycle. Techincally, a complete cycle is in 2 phases. A positive phase and a negative phase or your typical sine wave.

I went back to a major swing low in Feb. 07, 1993 on the GBPUSD weekly chart to start the cycles. This past week culminated in the arrival of all 3 cycles. Attached below is a weekly chart showing such. The blue verticals are 10 weeks, magenta 20 weeks, and brown 9 months. This 9 month cycle could also be considered a Natural Cycle for obvious reasons. Either way, the article is an excellent guide to cycle trading. http://www.decisionpoint.com/TAcourse/Cycles1.html

Manual Gann Grid Technique

2007-09-08T16:02:00.001-06:00

There is a technique I forgot to mention the post about creating a Gann Grid from scratch with Metatrader 4 tools. The technique is basically using the grid to find future squarings of price and/or time from the price action contained within the grid.

The initial move from the start of the grid went up to 135° of price and went out to just over 180° of time. Do the following:

1) Count out 135 bars and mark it.

2) Count out 180 bars from the high and mark it. The move went over 180° of time by a few bars, but 180 is close enough. The 180 puts time out near 360°.

The initial move defined a later move from beginning to end. It doesn's always work out that way but it's worth marking. The other thing worth noting is the price range the Euro is in. 1.3436 is the 135° from our start price. Move the decimal over on the price a couple of spots on price and you're 2/10 away from 135. So doing bar counts in that 135 area from any high or low will probably show some reaction.

Coming up to current events, I had created a new grid and the same techniques will be applied. Again, a EURUSD 30 min. chart is used.

Beginning a grid from a pivot low at 9/04/07 14:30, price had risen up to 90° of price in just over 45° of time. 56° of time to be precise. So using those numbers of 90° and 56°, price peaked 90° of time later after the Nonfarm Payrolls report from the measured peak. From the vertical lines of 45° and 90°, measure over 56° in time and price peaked at those marks.

Natural Cycle Update

2007-09-08T15:10:00.000-06:00

The Natural Cycle has arrived. I was thinking price was going to drop down into it, but the opposite happened and price has peaked at the arrival.

The safe method of trading a cycle event is to find confluence with other indications. Also, wait until the top or bottom has proved itself to be a top or bottom, ie wait for a pullback or wait a couple of days to see if a change in direction is in place.

I have a few other indications that this recent peak is a top and I have some sell stops waiting to trigger. But as always I start small so in case I'm wrong the loss is small.

The Ellipse Part 2

2007-09-06T11:51:00.000-06:00

The ellipse is one of my favorite shapes because it describes so much in the universe. Cycles are proven to be ellipticical in nature. The orbits of the planets, of solar systems around galaxies, sub atomic particles, and so forth, are all elliptical.

My first encounter with the ellipse in financial markets was through Brad Cowan and his book, "Four-Dimensional Stock Market Structures and Cycles ". According to Cowan, the major and minor axis form tetrahedral geometry structures and that the advances of price are contained within the ellipse.

The basic shape of the tetrehedron is the equiliateral triangle which I showed in a previous post to be a significant shape that shows up in market charts. So understanding the equilateral triangle it's easier to understand the placement of the ellipse on the chart.

Going beyond Cowan, my research has led me to form some interesting conclusions. Where the tetrehedron is the 3D version of the triangle, the 3D version of the ellipse would be the torus. But the torus isn't just a static object. It rotates around an axis twisting and turning to its center. So because of this 4 dimensional behavour, in essence a straight line within the torus can not be represented on a 2 dimensional chart as a straight line. There is time and motion dimensions not accounted for.

For example, if you were to hold a magic marker in your hand perfectly still for 365.25 days, the orbital path of the earth would carve out a torus in space around the sun. However, the Earth rotates on an axis tilted to 23°. While you would be perfectly still drawing what to you would be a straight line in space, the end result would be a line anything but straight to an observer out in space. If the observer in space attempted to draw what he saw on a 2 dimensional chart, the patterns of the lines would be large when they were close and small when they were far due to 3d perspective coupled with the elliptical orbit of the Earth.

That is just a fraction of the nature of the torus. There's also the vortex, but I'll save that for another time. But think about what is taught in junior high geometry. The circle, ellipse, parabola, and hybperbola are all cross sections of the cone. Does the cone not look like a solid form of the vortex? So do circles, parabolas, and hyperbolas, show up in the markets, too?

Cycles of 45 and 144

2007-09-03T22:19:00.000-06:00

Almost exactly a year ago I had calculated some cycles of 45 and 144 calendar days from a point in December of 2004. I had totally lost track of this chart and found it tonight. I wish I would have been using it the past year because it has held up extremely well. Notice the aqua lines cherry picking tops and bottoms. Trading nothing but those lines alone could have paid off handsomely.

Of course it's all hindsight and I took most of this year off from trading. But fate would have it that there is a blue line coming up later this Sept. I've got some other cycles in that general area as well. Plus time is advancing just past a 45 count.

There's also a triangle forming, so we'll see how it pans out. Triangles are hard to judge but whatever price is doing at that line, I'll be watching it to reverse the other way.The first two shots were taken a year ago showing the cycle behavour back then. The third is the current standing situation.

The Square of Nine image is the actual chart I used to get the idea of plotting the 144th count. The number that will eventually pop up is 216 which is 144 away from 360. 360 can be broken up evenly in many ways. The more common are squares and trines which are fourths and thirds respectively. But there are a host of other numbers that come out of 360 evenly and it's not against the law to use numbers that don't. Although numbers that fit into multiples of 360 do hold. 360 x 2 = 720. 144 goes into 720 five times. 5 is a very signifcant number as well. Square root of 144 is 12 which is Universal. 144 is also a Fibonacci number. The digits add up such that 1+4+4 = 9. 9 is highly significant and so on and so on.

Nested Geometry

2007-09-03T14:02:00.001-06:00

Nesting geometric shapes can provide turning points and vectors that define a path for price. A vector differs from a trend line in that a trend line usually defines consecutive highs or lows of price whereas a vector defines 2 points; a high to a low, a low to low, or a high to high.

The chart below starts with selecting a range which is highlighted by the red line. That red line defines one side of an equilateral triangle. Two lines are created from the angle of that line. One of them is 60° difference to define the second side of the equilateral triangle. The other is 30° difference to define the apex of the second nested equilateral triangle. Each circle is defined by the perimeter of the triangles or the interior of the triangles.

Some key things to note is how price ran straight up the 30° angle vector and terminated at the apex of the 2nd triangle. Also notice how price also ran down the outside of the outer circle reversing at the apex of the primary triangle.

It's also easy to get carried away. Last year I made something that ended up looking like a crop circle. Of course my buddies had to poke some fun and the 2nd chart below is Akuma99's interpretation. The third chart shows price taking off like a rocket at the end up the pattern.

Natural Cycles

2007-09-02T01:16:00.000-06:00

In the style of Gann this post is going to be some what cryptic. Some of the best cycles to use are Natural Cycles. Mainly because they are easy to project into the future as well as the past when they are found.

Nature squares the circle. The image on the left describes 1/2 the amount of the cycle. It also describes the nature of the cycle and the nature of one of the cycle's key components in at least two ways.

The chart below shows the GBPUSD daily chart going all the back to late 1980. The red verticle lines mark off 32° of this particular cycle. Each olive colored line is 1°. The key degrees are 32° and halving down to 1°.

Price doesn't always conform perfectly to Natural Cycle but it's usually within 1-2 degrees. Below is an up to date 4 hour chart showing how relevant the cycle remains.

Squaring a Range of Time

2007-09-01T07:41:00.000-06:00

In this post I'll go over an easy method of squaring a range of time using the tools in Metatrader 4.

As shown in the previous post about squaring a range of price, squaring the path of price can reveal future patterns of price behavour in price and time.

For this example the EURUSD 1 hour chart is being used. The first step will be to square the chart or set the scaling one to one which is done in the chart properties. It really isn't necessary, but it keeps the squares square as the chart advances and the range of price causes the scaling to fluctuate. Depending on the instrument and time frame it may be necessary to either switch to a different time frame, compress the spacing between bars, or both.

I scrolled back through the chart and just picked an arbitrary range. The time range will be 6/5/07 14:00 to 6/13/07 11:00 for a range of 140 bars. Use the cycle tool on those points to create the cycle going forward.

From the pivot bottom count up instances of 140 pips and mark with a vertical line. The range has now been squared to 140 x 140. 140 is now 360° in price of time of the previous range.

I like to break the rang up into halves so add verticle at 70 bars and a horizonantal at 70 pips from the pivot bottom.

Next up is the Gann grid. I put the end point on the 70 bar/70 pip intersection or the center of the 140 square. Then add horizontals at the intersections going up and down.

The chart below shows how price reacted at points of time and price. Also notice how the diagonals or 1x1 lines acted as trend lines as wells as support/resistence.

The grid can be divided smaller by adding more verticals and horizontals at the intersection points.

Bullseye on the Dollar Index

2007-08-29T20:57:00.000-06:00

Wow, every now and then even I get lucky. Back on Aug. 16 in this blog I posted some targets for the Dollar Index. The first mark hit right on the nose. Price spiked up to nail the 'X' that was placed two weeks ago. The second chart below shows new targets in addition to the those already there. I don't think all of them will hit. They're just possibilities. But the main thing is that I think the dollar is still going to rally. Based on the time and price cycles.

A Built Case on Euro Direction

2007-08-27T06:42:00.000-06:00

After sitting aside for a few days while price moved North against my previous analysis, I started to build a case to be on the right side for the next move. Luckily, my pip net strategy kept the loss small and to one trade.

The first piece major piece of the puzzle is simply a trend line. Going back to the Manual Gann Fan created on the Euro 30 minute chart, price has failed to penetrate a trend line. That trend line also provides the stop loss area.

The next piece is a "Natural Cycle" I keep track of. It doesn't always hit dead bang on the vertical lines but hits often enough and usually within a reasonable window of a few days either side. Keeping track of the swings reveals an interesting pattern. Price looks a little early, but close enough to call it a swing top based on a perponderance of the evidence or however you spell it.

Like the ellipse, the parabola is a powerful geometric shape. And like the ellipse it is also a conic section. In fact, the parabola can even be considered half of an ellipse. The method I use I picked up from a friend, Soso. No image for this one, but it's pretty easy to visualize. Basically imagine the cup/handle pattern, but with a bowl instead. Look for instances of symmetry for the lowest or highest point of the parabola.

The final piece to talk about here is the Gann Square of 144. 144 is 12 squared. It is also a Fibonacci number. Gann said that those were very important numbers because they show up in the Bible a lot. 12 is also the number of signs in the Zodiac of which Gann was very versed. I have two instances of the chart. One for calendar days and one for trading days. It's always tough to know which is going to matter the most, but both are at key lines or angles.

There is actually one other piece. The US Dollar Index is still playing out in the ellipse from a few posts back. Notice how price is at the ellipse boundary and also the 90° mate to the root ellipse axis. If it holds, it has no where to go but up. (That means down on the Pound and Euro. Up on the Yen, Loonie, and Swiss Franc.)

Countdown and Ellipse Update

2007-08-26T20:57:00.000-06:00

The Pound Ellipse failed. That rarely happens. Especially with that many points of contact. However, when the pattern does fail the time mark usually holds which it looks like it might. Going back to a natural cycle wave count method, I should have seen that there was a conflicting signal with the ellipse.

Ironically, a Euro ellipse I had drawn going to the upside that I thought would fail is playing out. Again, I should have acted on the conflicting signal and the 2-1 vote against the pound. Luckily, only one of the orders triggered for a loss. That's the good thing about using stop and limit orders.

On further analysis the fib bar count did work. I just missed the sign to look upward. I was too caught up in the ellipse pattern to think otherwise. 7 of the 8 previous bars were down and the last bar was down, so why I was looking to go short, is beyond me. The reversal was clearly going to be to the upside since the consolidation seemed to absorb any downward momentum. If I get time, I'll post some charts that all seem to be on the same side this time. Squares of 144, more ellipses, and the dollar index. I've got some short orders waiting on the down side on both pound and euro.

Gann Annual Forecast

2007-08-26T11:34:00.000-06:00

WD Gann used to put out forecasts every year and they were usually spot on. I read somewhere that his technique was to just go back x amount of years and put up the actual chart lines from previous years. So I just tried it out with GBPUSD daily data. I went back 5 years to 2002, 10 years to 1997, and 20 years to 1987 and plotted them out in Excel.

Pretty interesting results. 2002 and 1997 were a little early on the high compared to 2007 and the recent drop. 1987 was a tad late and inverted, but the magnitude is definitely there.

Here is a link to his 1929 forecast: http://mysite.verizon.net/bonniehill/pics.aux/gann/Forecast1929.jpg

Squaring a Range of Price

2007-08-25T18:13:00.000-06:00

For this post I'll show how to create a Gann Square using the stock Gann fan. This time the method used will be squaring the range. The chart will be a EURUSD 15 min. chart with the start and time being 8/22 3:15 GMT. The range to be squared is the most recent swing from high to low up to that point which covered 69 pips. The average daily range for the EURUSD pair is around 100 pips. So the square will be based on 69 x 2 or 138 to hopefully contain upcoming price movement within the square. Also, recall from the Gann Grid post that price moved in ranges of about 135 degrees or pips so 138 should be near spot on.

First, square the chart by setting the scale fix One to One in the chart properties. Mark off the bottom of the range with a verticle line at the bottom of the swing and horizontal lines on the bottom, top, and then an equal amount of the range higher. Mark off 69 bars and 138 bars in the future with vertical lines.

Next, add the Gann Fan tool to the bottom corner going forward. set the ratio to 1. Being a squared chart, a ratio set to 1 creates a perfect 1x1 or 45°. Add another Gann Fan to the top the upper corner going forward. Set the ratio to -1 to have the fan going downards. Because of the future chart scaling, the 1x1 angles of the fans might not hit the future corners perfectly. That's ok because as Metatrader adavances, the scaling becomes correct. It's a stupid bug, really.

Now mark off the intersections of the fans with vertical lines. Price usually reacts at those intersections. Sometimes just for a bar, other times it's a significant prce change of direction.

As you can see, price completed the square in both price and trime. The intersection lines provided a few clues to when price might react in time. In a future post, I'll go over squaring a range of time.

Updated Pound Fib Count Down

2007-08-22T12:52:00.001-06:00

Today is the Fibonacci Count down day on my British Pound Daily chart. I've had to wait for price to make what I believe is a top for the day. I've set up a net of sell stops to catch price going down. If I'm wrong, hopefully only one or two if any get triggered for small losses.

The first chart shows my target which is 3-8 days out. The price target is based on that trend line that has been very strong. If it gets broken, that's all the better. But I think it all hinges on the New Homes Sales report due this Friday along with a couple of other reports.

The second chart is the ellipse updated from a previous post.

Manual Gann Grid Update

2007-08-22T12:30:00.000-06:00

Here is an updated chart of the Gann Grid created in a previous post. Note how "timely" many of the peaks were. I shorted a couple of those with good results. Knowing "when" to start looking to get out makes all of the difference in the tight ranges. All of that based off of a grid originating over 2 months ago.

The Ellipse

2007-08-20T19:24:00.001-06:00

Last week's GBPUSD spike downward provided the 3rd point of contact on a 1 hour chart for the construction of an ellipse. I had started the ellipse based on a 2 points of contact, but was off in enough ways to not trade it.

One of the key elements is the angle of the major axis. More often than not, it will be 60° in difference from its mated axis of its mated ellipse. The current angle is 63° to the chart, but just over 60° from it's mate.

The minor axis usually defines the beginning or end of the famous 50% consolidation area. In the chart below, the minor axis acted as a minor support level to be broken while the major axis provided the "path".

Another other key element is the inner circle. The inner circle usually defines the consolidation area by either containing price along the perimeter or the perimeter acting as some sort of support/resistance.

Price is in a triangle right now, but the apex is also a minor degree in time from the start of the Gann Grid. Based on my analysis from other charts, I'm expecting price to go down. However, I wouldn't be surprised to see a Ross Hook aka false breakout heading North before jetting South. So I wait for a signal to short.

I'm also including a 4 hour chart of the USDX or DXY(Dollar Index) and an ellipse I've been watching there.

Gann Grid Clarification

2007-08-20T16:38:00.000-06:00

I've been asked to explain the Gann Grid specifically the formula for finding 45° from the start price.

The formula I used was for Excel. It might be easier in some different formats.
In a more function type format it would be:

Degrees up from start price = (squared((sqrt(converted_price+degree_factor)))/10000

For more of a descriptive notation maybe something like:

Degrees up from start price =((|converted price + degree factor|) ^2)/10000

We'll say that the pipes on either end mean to square root that section.

Going through the steps the first thing to do is convert the price to something squareable. So 1.3261 becomes 13261.

So the formula should read:
45° Price=((13261^0.5+.25)^2)/10000 = 1.3319

^.05 means to the 1/2 power or the square root. ^2 means square. (^3 means cube, etc)

The degree factor is used to get the degrees converted to a base 10 number or whatever. It's found by taking the (degree/360) x 2. So in our case, (45/360)*2

So the full process is to take the converted price 13261, find the sqrt (115.156) and add it to the Degree Factor of .25 gives 115.406 and then square that which gives 13319. Divide by 10000 to get price of 1.3319.

I hope that makes better sense.

Fibonacci Count Down

2007-08-19T22:35:00.001-06:00

After doing some Fibonacci bar counting and the GBPUSD Daily Chart, the date 8/22/07 comes up as a countdown and cluster point. It's also 450° or 1 1/4 times around the circle from the start of the swing low and start of the current Gann Grid.

The count is 1, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, etc. It's also good to look for doubles of those numbers. 2, 6, 10, 16, 26, 42, 68, 110, etc. The hard part is to not to get carried away. By starting with the Fibs first, the numbers will usually reveal themselves. In the chart below I found 2 instances of 68 or 34 x 2.

Fibonacci growth cycles don't always look pretty, but the points of the cycle make for good swing trades because the minimum is at least 3 trading days and many times 5 to 8 trading days. There's a nice tetrahedron in there if you can see past some of the clutter. Ideally, this point of time will also be a good spot to continue the Fibonacci growth patterns and count down.

Based on the last low, the date will be 3 bars away, so if the last low is truly a low, I'll be looking to short on the time target.

Intraday Gann Grid Construction

2007-08-18T10:17:00.000-06:00

In this blog entry I will show how to come up with degrees of price and time and plot them on an intraday chart using the stock tools in Metatrader 4.

For intraday, the first thing I do is square the chart. ie one unit of price equals one unit of time. To do that, right click on the chart or hit F8. On the lower left, click the box for "Scale Fix One to One". You may have to use the +/- keys or chart zoom to get price to fit in the screen.

Next, find a high or low that you want to use as the zero point. For this example, I'm using a EURUSD 30 minute chart and going all the way back to 6-13-07 10:30. Price for the low is approx. 1.3261. Because this is a low, I want to build the grid going up first.

The price needs to be converted to something useful. Because this is intraday, I drop the decimimal. I then apply the handy price to degrees formula to come up with the next higher 45° price level on the Square of Nine. (In reality, Gann never called it the Square of Nine. His Square of Nine was something entirely different.)

45° Price=((ConvertedPrice^0.5+DegreeFactor)^2)/10000
or
45° Price=((13261^0.5+.25)^2)/10000 = 1.3319

To figure the price level going down the formula is the same except the Degree Factor is substracted instead of added:

45° Price=((ConvertedPrice^0.5-DegreeFactor)^2)/10000

The key component here is the .25. I want 45°. 45° is 1/8 of the circle or .25. 180° would be 1, 360° = 2, etc.

So now I have the price for 45°. Next up is time. For this example I'm using each bar as one degree. So I count out 45 bars and mark it with a verticle line. Now I have the start of price and time and the termination of price and time for the MT4 Gann Grid tool. If your chart has been squared, the Gann Grid tool should now form perfectly square diaganols.

If you like doing the math, calculate the price levels up and down. I don't so I just put horizontal lines at the intersections. Note that if you don't square the chart, the intersection lines will shift in horizontal scale and it will appear that the horizontal lines aren't correct as the chart advances forward or back. They are correct, just not in relevence to the messed up chart scaling. Time will always be correct unless you don't count off your bars right when setting up the first square.

For the time lines, I use the cycle tool and add in the time lines. I also add one more instance of verticle cycles to mark off 360° degrees of time. In this example, I use red.

We now have 45° levels of price and time going out to infinity. The first chart below shows the start. The second chart shows current events. Notice how the levels are still relevent in both price and time. The most recent division of time was Friday's high from the move resulting from the Fed interest rate drop.

This type of chart is also called a Pyrapoint chart and you can read about the Pyrapoint style of usage here: http://www.ensignsoftware.com/help/pyrapoint.htm

Dollar Showing Strength?

2007-08-16T20:09:00.000-06:00

The US Dollar has made quite the rally. However, I don't think it's due to fundamental strength. Quite the contrary. I think it's due to the liquidation of other assets and instruments such as the US stock markets. They've been taking a beating the last few weeks. But since the greenback doesn't really have any real strength, I think it's only a matter of time until dollars get dumped for something else. That's just my uneducated opinion. I'm sure it's not original nor unique, but I haven't browsed around for any commentary that is in agreement. It's just a hunch.

Below is a 4 hour chart of the US Dollar Index (DXY). The aqua and yellow moving average looking lines are moving average forecasts. They don't track price, but give a general idea on direction and timing. They will invert, as many cycle line type forecasts will ie Bradley Index, Mass Pressure Index, and most planetary cycle composites. But when they turn, or at least show a bump, price usually acts in kind. They can even show possible flat and consolidation areas as well as major changes in direction. I've marked of red X's as possible price and time targets. Even if price doesn't touch those spots, I think that the gray vertical lines will still be significant turns. Those targets are based off of the same geometric concept I used in my very first forecast that is talked about in the first entry of this blog.

And now about the market turn forecast method I mentioned in the last entry. Unfortunately, I lost the image that showed the details for that particular GBP/JPY chart. But I do have an example for the USD/CHF. This is not a pair I normally trade so I when I created this example, I wasn't too familiar with the movements or ranges. This pair mirrors the EUR/USD pair, which I don't really follow at the 1 hr. detail.

The method is simple and is one I discovered in my early days of trading the foreign exchange market. Many PC charting packages have the ability to draw trend lines as rays. In other words they go on forever. What I noticed was that when these lines would intersect there would be a reaction in price. I'm not talking about breakouts from a triangle, although that is the best example. I'm talking about what seems like completely unrelated trend lines. The chart below is kinda messy, but it illustrates the idea. Not every intersection will be a reversal. Many times it's just a rogue bar. Other times it's the beginning or end of a run.

The concept isn't limited to just trend lines. Support or resistance lines provide excellent forecasts when intersecting a trend line. There are some other related tricks and ways to optimize the process that I won't go into here, but with experimentation, it shouldn't be too hard to figure out what those are. One thing I will say is that it helps to use fixed scaled charts or squared charts. Otherwise the trend lines will change in angle as the chart is advanced both forward or back and the intersection points will move around. Squared charts are best. Because I was in a hurry, I forgot to square the chart used in this example. It is a fixed scale chart though, so hopefully that minimizes the shift. Once price has advanced far enough, I'll post up an updated chart to see how things panned out.

British Pound Update

2007-08-15T06:55:00.000-06:00

Price has runaway like a train. My price target was reached and them some, but a lot earlier than I expected. Now my 32 bar target is a long trade target and perhaps a good area to short? Because 23 bars is another number that showed up quite a bit in the past, I've drawn in a yellow time marker at 23 bars from the top at where there could be a retracement based on the previous number cycles.

The previous 1 hour chart proved me wrong but proved squaring right. I got stopped for a small loss. The squaring of 360 degrees of price and time was the breakout bar to the downside. That was my short opportunity and I missed it. However, anytime "price and time square change is inevitable" - WD Gann.

The next blog entry will show a method that forecast the peaks and valleys in the chart below.

British Pound Price and Time Squares

2007-08-13T07:28:00.001-06:00

I'm out of my long trades. I had two entries right on time. The second entry didn't yield a whole lot of pips, but at least it wasn't a loss. I had used a 15 minute chart to come up with a price and time target. The price target was wrong, but the time target proved to be a spike and the bar where price broke support. It's easy to be wrong on price, but on time, there's usually something happens. A spike, a reversal, breakout, etc. The hard part is knowing what side to be on and what to do if you're wrong.

Below is a 1 hour chart showing one of the reasons I went long in the first place. Price and time squared up at 315 degrees. 315 is a powerful number on the British Pound that usually means reversal. More so than 360 degrees with the method I normally use. This applies to all time frames. However, in this case, price has gone on down to 360 degrees of price. If I get a signal to short, around 315 of price or a fibonacci price number, I'll look for the 360 degree corner of the square as the target for both price and time. If the target of price hits, it's trailing stops. I probably won't trade long again until I see signs of reversal on the daily charts. But my focus on the short side as indicated in my previous post.

British Pound bar counts

2007-08-12T12:03:00.000-06:00

One of the more simple ways to find cycles is by counting bars. Simply go back on a chart and start counting the bars from peaks to valleys on the big moves. Also count the bars on the rectracements. Count the bars on the minor moves. Count the bars peak to peak and valley to valley. More often than not, the same numbers will show up. The chart below shows where I counted the major moves on the GBP/USD pair. Notice which numbers come up consistently.

So now that I've got a number for the big move, I concentrate on the smaller moves. The smaller moves tend to follow the Fibonacci sequence. 1,3,5,8,13,21,34, 55,89,144 etc. So from a top or a bottom, I'll watch for what happens at 3 bars, then 5 bars, then 8 bars. Because these are Fibonacci numbers, there will be recurring patterns. IE the 8th bar from the 5th bar is 13 bars but also 21 bars from bar 1. Knowing that, it's easy to simply count the bars into the future and watch for signs of a turn and also come up with a long term direction to trade and a long term target. (Long term being relative to the chart size.)

The daily chart below shows the major counts and then minor counts of the current move I'm trading. There are also arrows that show my manual entries based on "time". The limit and stop entries for add on positions aren't shown. Those are based on price and not time. Mostly simple support/resistence breaks. A future post will go into the various support/resistence methods I use.

For the most part, I try and stick to a specific direction. Occasionally something shows up that I can't pass up trading which is why I'm long right now. Treading very carefully, though.

One of the things that bothers me is that most cycle and time books and materials are long on charts and concepts but usually say nothing about actual trading. For example, the Brad Cowan 4D Market Geometry books do not say one word about trading. Pretty hard to believe. So that leaves the reader to figure how to actually trade the concepts. Pretty patterns on the left and the past don't do much for the right side of the chart and the future. So I'll try and focus on the right where it matters.

A little history and how I ended up where I am at

2007-08-12T09:35:00.000-06:00

I started out studying charts and trading back in college in 1989 through Ken Roberts and his "World's Most Profitable Manual" or something like that. It was basically a pattern trading system for the futures market with a lot of hype. Knowing what I know now, it was probably the "World's Most Dangerous Manual". It really only showed a few patterns and then hyped up the amount of money one could make with little regard to money management. I do think chart patterns are key and while I never traded a dime in the future's market, I still watch for chart patterns as they provide the best setups and easy targets for trading. I never did do any actual trading while going through college, but I analyzed futures charts and paper traded off and on until about 1997.

In 2001, I saw some 4x Made Easy infomercial that introduced me to the forex market and rekindled the trading bug. I attended one of their seminars to find out more but wasn't impressed with the price nor the marketing hype and gimmicks. But I was very interested in the forex market and the low margin requirements to get in the game. It was also my first introduction to indicators. My previous study had been only chart patterns and trend lines. Trading naked as it's called. I will say that the basic 4x Made Easy concept works. Trading multiple time frames and waiting for all time frames to be in agreement.

Over the next year or so after that 4x Made Easy seminar, I studied every indicator out there. The usage, the math, the pros, and cons. I came pretty close to replicating the 4x Made Easy lines. I also designed some indicators of my own that went into a complete system I designed in Excel with a live data feed and flashing colors showing when and where to buy/sell. It was basically 4x Made Easy on steroids. I did very well with that system but it was missing one element. Time.

My 4x Made Hard system, as I called it, was very good for showing when to trade with the trend, what price to add on and exit and a general idea on when. But there was no precise way to gauge turns in advance other than a couple of probables that showed up on the intraday charts occasionally. In researching, designing, and using the system, I did learn a lot about market price behavior. There's a pretty detailed journal at moneytec.com that goes over some of my exploits from back then. A lot of the images probably don't work though. http://www.moneytec.com/forums/f118/4x-made-hard-1-0-a-15803/

In researching how to add a time element to the 4x Made Hard system, a whole world was opened up that I had no idea existed. My first research was into WD Gann. Most of his writings went right over my head. I then read people's writings about using the Gann Square of Nine. Now it was starting to make sense. From there I found Brad Cowan's works. Again, most of it went right over my head. But diligent study not only of his books, but his suggested areas of study... ie platonic solids, sacred geometry, astronomy, astrology, etc... I made my first forecast using market geometry and cycles on the EURUSD pair. That pattern took about a month to play out, but price hit my target almost to the day and to the exact price and conformed completely to the geometric structure.

I used to keep some trading journals at www.moneytec.com. From that, I met a guy who became my mentor and showed me the path. From this path I've met a handful of others on the same journey whom have provided me more than I could ever imagine in finding the cycles or price and time in the markets. So a big thank you goes out to Stoxx, Akuma, Soso, Bear, and Xtsunami. They'll occasionally post here: http://beginnertrader.com/forum2/

I never really went back to that 4x Made Hard stuff. I was able to get the charts out of Excel and into Metatrader 4, but I rarely use it. I did add a cyclical element that is still in sinc, though. But even then, I think that there are better ways. And that is what this blog is about.