Thursday, November 17, 2022
S&P 500 Performance by Weekday
Friday, October 14, 2022
Periods When to Make Money | Benner Cycle Projection into 2023 Major Low
Edward R. Dewey (1967): » If you had used these dates for trading, your percentage gains between 1872 and 1939 would have been 50 times your losses! « |
In 1875 he published a book called "Benner's prophecies of future ups and downs in prices" forecasting commodity prices for the period 1876 to 1904. Many - not all - of these forecasts were fairly accurate. The Benner Cycle includes:
- A (upper line): "Years in which Panics have occurred and will occur again." A 54 year cycle alternating every 18, 20 and 16 years.
- B (middle line): "Years of Good Times, High Prices and the time to sell Stocks and values of all kinds." Cycles alternating every 8, 9 and 10 years.
- C (lower line): "Years of Hard Times, Low Prices, and a good time to buy Stocks, 'Corner Lots', Goods, etc, and hold till the 'Boom' reaches the years of good times; then unload". A 27 year cycle in pig iron prices with lows every 7, 11, 9 years and peaks in the order 8, 9, 10 years (B - middle line).
David McMinn (2022) - Benner Cycles & the 9/56 year grid
Lars von Thienen (Oct 9, 2022) - Market Cycles Report - Cycles of Financial Crisis using long term static cycle models.
Sunday, September 25, 2022
Swing Trading - Rules and Philosophy | Linda Bradford-Raschke
- If the trade moves in your favor, carry it overnight--the odds favor follow-through. Expect to exit the next day around the objective point. An overnight gap presents an excellent opportunity to take profits. Concentrating on only one entry or one exit per day relieves the pressure.
- If your entry is correct, the market should move favorably almost immediately. It may come back to test and/or exceed your entry point a little, but that's OK.
- Do not carry a losing position overnight. Exit and play for better position the next day.
- A strong close indicates a strong opening the following day.
- If the market doesn't perform as expected, exit on the first reaction.
- If the market offers you a windfall of big profits, take them to the bank on the close.
- If you are long and the market closes flat, indicating a lower opening the following day, scratch or exit the trade. Play for better position the next day.
- It is always OK to scratch a trade!
- Use tight stops when swing trading (wider stops when trading trend).
- The goal always is to minimize risk and create "Freebies."
- When in doubt--get out! You have lost your road map and your game plan!
- Place your orders at the market.
- When the trade isn't working, exit on the first reaction. ANTICIPATE!
Traders Laboratory (2007) - Taylor Trading Technique |
How does one anticipate entry? The following may be indicators of a buy day or a sell day:
The Count: Start searching for a buying day 2 days after a swing high or, conversely, a shorting day 2 days after a swing low. Ideally, the market will move in complete 5-day cycles. (In a strong trend, the market will move 4 days in the primary direction and only 1 in reaction. Thus, one must seek entry 1 day earlier.)
"Check Mark" on the Test: The potential entry is sought opposite, or contrary to, the previous day's close. If looking to buy (sell), one first wants the market to "test" the previous day's low (high), preferably early in the day, and then form a trading pattern that looks like a "check mark" (see examples). This pattern sets up and establishes a "double stop point" or strong support. If entering a market with only a "single stop point" or support formed by today's low only, exit on the same day--the trade is clearly against the trend.
Close vs. Open: The close should indicate the following day's opening. When a market opens opposite what is expected or indicated by the trend, one may first look to "fade" it--but must take profits quickly. Then look to reverse!
Support (Resistance): Is today's support (resistance) higher or lower than yesterday's?
Swing Measurements: Where is the market relative to the last swing high or low? Look for swings (up or down) of equal length, and for retracements of equal percentage.
No matter in what time frame, always look for supply at tops and support at bottoms. Penetrations should be accompanied by volume and activity. Expect trends, either up or down, to last for either 2 or 4 weeks. The following conditions are fairly reliable indicators for the start of one of these trends (I personally skip the first buy or sell swing when one occurs because the move ensuing could be quite strong):
- Narrowest range in the last 7 days
- 3 consecutive days with small range
- The point of a wedge
- A breakaway gap
- A rising ADX (14-period) above 32
- NEVER, ever, average a loss! Sell out if you think you are wrong. Buy back when you believe you are right.
- NEVER, NEVER, NEVER listen to anyone else's opinion! Only YOU know when your trade isn't working.
Tuesday, July 26, 2022
Range, 3 Day SMA, Day Counts & Reversal Harbingers
A day in which there is a new high followed by a lower close
is a downwards reversal day (RB). An upwards reversal day is a new low followed by a
higher close. A reversal day by itself is not significant unless it can be put
into context with a larger price pattern, such as a clear trend with sharply
increasing volatility, or a reversal that occurs at the highest or lowest price
of the past few weeks. Short-term reversals are likely after wide-ranging (WR4) and narrow-ranging days (NR4), especially when the open, high, low and close of the daily price bar are altogether above or below of a simple three-day moving average line of daily close prices.
A wide-ranging day is likely to be the result of a price shock, unexpected news, or a breakout in which many orders trigger one another, causing a large increase in volatility. A wide-ranging day could turn out to be a spike or an island reversal. Because very high volatility cannot be sustained, a wide-ranging day will likely be followed by a reversal, or at least a pause. When a wide-ranging day occurs, the direction of the close (if the close is near the high or low) is a strong indication of the continued direction. An outside day (OB) often precedes a reversal. An outside day can also be a wide-ranging day if the volatility is high, but when volatility is low and the size of the bar is slightly longer than the previous bar, it is a weak signal. As with so many other chart patterns, if one day has an unusually small trading range, followed by an outside day of normal volatility, there is very little information in the pattern. Context and selection are important.
Monday, July 4, 2022
In Any Bar Chart Only 8 Possible Range Patterns | Larry Williams
Larry Williams presented a free session at the November 2014 Las Vegas Traders Expo in which he discussed 8 possible Range Patterns. He showed that from any bar to the next there are only 4 possible outcomes:
- Down Range: Last Bar's high is lower than prior Bar's high; and last Bar's low is lower than prior Bar's low.
- Up Range: Last Bar's high is higher than prior Bar's high; and last Bar's low is higher than prior Bar's low.
- Inside Range: Last Bar's high is lower than prior Bar's high; and last Bar's low is higher than prior Bar's low. On a Daily S&P500 Chart this occurs approximately 12% of the time.
- Outside Range: Last Bar's high is higher than the prior Bar's high; and Bar's low is lower than the prior Bar's low. On a Daily S&P500 Chart this occurs approximately 12% of the time.
Price action cannot occur in any other way. Within these 4 Range Patterns each last bar can either be an up bar or a down bar. So there are actually 8 possible Range Patterns:
1. Down Range, Down Day
2. Down Range, Up Day
3. Up Range, Down Day
4. Up Range, Up Day
5. Inside Range, Down Day
6. Inside Range, Up Day
7. Outside Range, Down Day
8. Outside Range, Up Day
Using these 8 patterns some powerful strategies can be created. Larry Williams presented back-tested statistics associated with trading these patterns using a simple entry and exit technique. He stressed that they were not the best entry or exit techniques but shown because they were easy to understand and program. This strategy is intended only to show where we have a bias or advantage in the marketplace.
- Entry: At market close
- Stop Loss: Based on $ Stop
- Exit: First Profitable Opening
His message was that we could go home and verify using our own software. His results for testing this on the e-mini S&Ps from 2002 forward [to 2015] were as follows:
So, the Down Range, Down Close day [1.] offers the best potential short term 'long' setup based on net profit. This was the take-home message of the presentation.
Larry further dug into the Down Range, Down Close setup to uncover which day of the week offered the best trade: The stats support the 'Turnaround Tuesday' concept.
And further investigating by Trading Day of Month revealed that 1, 17, 19, 22 and 23 were the best days, showing 92% winners and $47,500 net profits with 107 trades.
It was also found that a Down Range Larger Range day was better than a Down Range smaller Range day. $205 Avg 80% Win, vs $33 Avg 85% win,
Also naked close was better than a covered close (naked close meaning that the close was outside of the previous day’s range). $155 Avg 83% Win vs $30 Avg 83% Win
And combining these two concepts:
Down Range, larger range, Covered close: $60 Avg, 83% Winners
Down Range, larger range, Naked close: $215 Avg, 85% Winners
References:
Wednesday, July 29, 2015
The Fractal Design of Time | Martin A. Armstrong
- The model consists of cycle waves that vary in length, from shorter to longer, and build up over time; for example, 8.6 to 51.6 to 309.6 years.
- It examines these cycle waves to discover when they are set to culminate, reflecting a possible shift in market confidence at that point in time.
- This shift in confidence is reflected by capital flows and concentration.
- The longer the cycle wave, the greater the magnitude of the shift in confidence.
- The dates in the model that reflect possible shifts are referred to as ECM turning points.
Thursday, April 26, 2012
Capturing Trend Days | Linda Bradford-Raschke
A trader caught off guard will often experience his largest losses on a trend day as he tries to sell strength or buy weakness prematurely. Because there are few intraday retracements, small losses can easily get out of hand. The worst catastrophes come from trying to average losing trades on trend days. Fortunately, it is possible to identify specific conditions that tend to precede a trend day. Because this can easily be done at night when the markets are closed, a trader can adjust his game plan for the next day and be prepared to place resting buy or sell stops at appropriate levels.
We can tell when the market is approaching the end of contraction or congestion because the average daily range narrows. We know a potential breakout is at hand. However, it is difficult to predict the direction of the breakout because buyers and sellers appear to be in perfect balance. All we can do is prepare for increased volatility or range expansion!
Most breakout trading strategies let the market tip its hand as to which way it wants to go before entering. This technique sacrifices initial trade location in exchange for greater confidence that the market will continue to move in the direction of trade entry.
The good news is that breakout strategies have a high win/loss ratio. The bad news is that whipsaws can be brutal!
- NR7 — the narrowest range of the last 7 days (Toby Crabel introduced this term in his classic book, Day Trading With Short-term Price Patterns and Opening-range Breakout);
- A cluster of 2 or 3 small daily ranges;
- The point of a wedge-type pattern (which usually exhibits contracting daily ranges);
- A Hook Day (wherein the open is above/below the previous day’s high/low — and then the price reverses direction; the range must also be narrower than the previous day’s range; leads traders to believe that a trend reversal has occurred, whereas the market has instead only formed a small consolidation or intraday continuation pattern);
- Low volatility readings, based on such statistical measures as standard deviations or historical volatility ratios or indexes;
- Large opening gaps (caused by a large imbalance between buyers and sellers);
- Runaway momentum (markets with no resistance above in an uptrend or no support below in a downtrend. This condition differs from the above setups in that volatility has already expanded. In a momentum market, however, the huge imbalance between buyers and sellers continues to expand the trading range.
Average True Range highlights range contraction/expansion – The 3-Day Average True Range Indicator highlights how cyclical the phenomenon of range contraction/range expansion is. Volatility tends to be more cyclical than price.
Add the following techniques to your repertoire. All of them will ensure you participate in a trend day.
- Breakout of the Early-morning Trading Range. The morning range is defined by the high and low made in the first 45-120 minutes. Different time parameters can be used, but the most popular one is the first hour’s range. Wait for this initial range to be established and then place a (1) buy stop above the morning’s high and a (2) sell stop below the morning’s low. A protective stop-and-reverse should always be left in place at the opposite end of he range once entry has been established.
- Early Entry. Toby Crabel defined this as a large price movement in one direction within the first 15 minutes of the opening. The probability of continuation is extremely high. Once one or two extremely large 5-minute bars appear within the first 15 minutes, a trader must be nimble enough to enter on the next “pause” that usually follows. With many of these strategies, the initial risk can appear to be high. However, a trader must recognize that as the trading volatility increases so too does the potential for good reward.
- Range Expansion off the Opening Price. A predetermined amount is added or subtracted from the opening price. Though Toby Crabel also described this concept in his book, it was really popularized by Larry Williams. The amount can be fixed, or it can be a percentage of the previous 1-3 days’ average true range. With resting buy and sell stops in place, the trader will be pulled into the market whichever way price starts to move. Entry, often made in the first hour, can be made earlier than the breakout from the first hour’s range. In general, the further price moves away from a given point, the greater are the odds it will continue in that same direction. The ideal is continuation in the direction of the initial trend once the trade is entered.
- Price Breakout from the Previous Day’s Close. This strategy is similar to the above, with buy and sell stops based on a percentage of the previous 1-3 days’ range added to the previous close. The advantage to using the closing price is that resting orders can be calculated and placed in the market before the opening. The disadvantage is the potential for whipsaw if the market moves to fill a large opening price gap. (Another version of a volatility breakout off the open or closing price is the use of a standard-deviation or price-percentage function instead of a percentage of the average true range. All the above methods can be easily incorporated into a mechanical system.)
- Channel Breakout. One of the more popular types of trend-following strategies in the nineties, Donchian originally popularized the concept by employing a breakout of the 4-week high or low. Later, Richard Dennis modified this into the “Turtle System,” which used the 20-day high/low. Most traders don’t realize that simply entering on the breakout of the previous day’s high or low can also be considered a form of channel breakout. (Another popular parameter is the 2-day high or low.)
Instead of a strategy based on time, such as the close or the next day’s open, one can also use a price objective. One popular method is to take profits near the previous day’s high or low. One can also determine a target based on the average true range. For the classic market technician, point-and-figure charts can provide a “count” which establishes a price target. This method is valid only if price breaks out of congestion or a well-defined chart formation.
However, a discretionary day-trader will learn that the best trades move in his favor immediately. In this case, move the stop to breakeven once the trade shows enough profit. The stop can be trailed as the market continues to trend, but not too tightly. Because a great majority of the gains can occur in the last hour as the trend accelerates, try not to exit prematurely.
When trading multiple contracts, scale out of some to ensure a small profit in the event of a reversal. However, do not add to a position: The later the trade is established, the more difficult it is to find a suitable risk point.
If you are going to trade a mechanical system, you must be willing to enter all trades! It is impossible to know which trades will be winners and which ones losers. Most traders who “pick-and-choose” have a knack for picking the losing trades and missing the really big winners. The hardest trades to take tend to work out the best! With most systems, a majority of the profits come from less than 5% of the trades.
Though most breakout methods have a high initial risk point, their high win/loss ratio makes them easier to trade psychologically. You might get your teeth kicked in on the losers, but, fortunately, big losses do not happen very often. Also, if trading a basket of markets, as one should with a volatility breakout system, diversification should help smooth out the larger losses.
To summarize the main benefits of trading a breakout system:
- it teaches proper habits, in that there is always a well-defined stop;
- you get lots of practice executing trades;
- it teaches the importance of taking every trade;
- it teaches respect for the trend.
- overall average daily trading range (must be high enough to ensure wide “spread”);
- volume and liquidity;
- seasonal tendencies (e.g., grains are better markets in spring and summer);
- relative strength;
- commercial composition.
Thursday, March 15, 2012
The 8.6 Year Global Business Cycle 2002 - 2028 | Martin A. Armstrong
2002.850 = 2000-Nov-06 (Mon) = Major Low
2005.000 = 2005-Jan-01 (Sat) = High
2006.075 = 2006-Jan-28 (Sat) = Low
2007.150 = 2007-Feb-24 (Sat) = Major High
2008.225 = 2008-Mar-23 (Sun) = Low
2009.300 = 2009-Apr-20 (Mon) = High
2011.450 = 2011-Jun-14 (Tue) = Major Low
2013.600 = 2013-Aug-08 (Thu) = High
2014.675 = 2014-Sep-04 (Thu) = Low
2015.750 = 2015-Oct-01 (Thu) = Major High
2016.825 = 2016-Oct-28 (Fri) = Low
2017.900 = 2017-Nov-25 (Sat) = High
2020.050 = 2020-Jan-19 (Sun) = Major Low
2022.200 = 2022-Mar-15 (Tue) = High
2023.275 = 2023-Apr-11 (Tue) = Low
2024.350 = 2024-May-07 (Tue) = Major High
2025.425 = 2025-Jun-05 (Thu) = Low
2026.500 = 2026-Jul-02 (Thu) = High
2028.650 = 2028-Aug-25 (Fri) = Major Low