Back to Trading!

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

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

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

GBP/USD: GBPUSD_Multiple_Time_Frames_Aug.2011

EUR/USD: EuroTrade

True Market Geometry Part 1

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.

Manual Gann Grid Continued

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.

Cycles of 45 and 144

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.

Squaring a Range of Time

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.

Gann Annual Forecast

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

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.

Intraday Gann Grid Construction

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