Compare & Contrast with Christopher Lewis

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Compare and Contrast with Dr. Barry Burns

Dr. Barry Burns, I believe, does not like to define a trend as higher highs and higher lows or vise versa, believing this to be a subjective means of identification. I don’t like defining trend in this way either, but primarily for a different reason—that being laziness. I do not want to be having to try to identify and compare highs and lows all the time.

However, from my perspective, Burns’ reference to the dictionary definition of “to extend in a general direction” as the way to define trend is also subjective. For example, the interval that a day trader would view as extended price is not likely to match what a position trader would consider to be extended price

Moreover, Burns says that he considers the 50-period SMA (simple moving average) to be the intermediate-term trend and the 200-period SMA to be the long-term trend. This might not be subjective, but I do view it as kind of arbitrary.

Personally, there is no way I can conceptualize the 50-period SMA as the intermediate-term trend on a daily chart, and then turn right around and regard the 50-period SMA as the intermediate-term trend on a monthly chart as well—that just doesn’t work for me!

I therefore represent the intermediate-term trend on a given chart using a specific, unique moving average for that particular time frame.

If my intermediate trend on a daily chart were the 50-period SMA, on my monthly charts it would be more like the 3-period SMA. In actual practice however, I do not categorize my trend lines in this way. Rather, I use instantaneous, fluctuating, short-term, intraday, and day-to-day trend lines, and leave weekly, monthly, and yearly moving averages for position traders/investors to worry about.

 

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I am pretty much satisfied with my Forex trading system and have therefore been looking for ways to stay sharp and more clearly define my approach to trading, which I'm thinking I might be able to do by comparing one of my forecasts each day with that of Christopher Lewis.

I have obviously expanded the forecasts I check beyond Christopher Lewis (who is apparently do longer recording daily videos) to also include the analyses of Cristian Moreno and AJ Monte, and would now like to compare and contrast my trading system not only to Lewis, by also to Dr. Barry Burns.

In the previous post I mentioned how neither Burns nor I define trends by higher highs and higher lows or vice versa, yet differ in that Barry recommends using the 50- and 200-period moving averages whereas the moving averages I use are dependent on and change given the particular time frame in which I am operating, and include not two categories of trend lines—but five.

Another difference between Barry and I is in how he deals with momentum (or the strength of a trend). He sees momentum (velocity × mass) as a leading indicator (i.e., number of trades × volume, or more specifically, × the size of individual orders = institutional traders = smart money).

Based on his (lower panel) momentum indicator, he would take the first trade pictured below (at the top of the first vertical arrow) but not the second (marked by the reddish dot at the top of the second vertical arrow).

However, I would take the second trade, for three reasons:

1. First of all, I have no way of knowing when momentum might return. But when I exit my positions, I guarantee I will not be there if and when it happens—and it DOES happen, quite often and many times quite suddenly.
2. Second, I use five different moving averages—not two—so that I have a very clear picture in terms of whether rates are still rising or falling. So if my lines tell me that price is still rising, I WANT those pips between that red dot and the next high in the middle of the chart.
3. And Finally, I want to be long at the bottom of a cycle, provided the asset is still in an uptrend, whether there is presently strong momentum or not. I don’t mind reaping gains gradually, so opting not to go long at the bottom of a cycle just does not compute/follow in my mind, not until or unless I detect that the trend is initiating a reversal in the other/opposite direction.

 

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Like Burns, I see the identification of cycles as a major asset with respect to timing one’s trades in a manner such that the odds of meeting with success approaches maximum probability.

But whereas Barry uses cycles along with trend and momentum (given that I have no idea when momentum might return and because it can return so swiftly) I use cycles along with my immediate, fluctuating, and short-term trend lines in place of momentum so that I know the moment volatility/liquidity has reentered the market.

And rather than look to a lower panel modified stochastic oscillator to define cycles (as Burns apparently does) I prefer to use a dynamic moving average envelope that defines typical price range based on historical data.

 

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When offering a warning against trading cycles during periods of consolidation in his “Make Money by Breaking Every Trading Rule You Ever Learned” video, Dr. Burns suggests that traders should look for reversals if such consolidation is preceded by an extended trend. But I would revise this statement to suggest looking for reversals given such consolidation primarily if the asset has reached the outer boundary/limit of a statistically defined price range—and even then, one should be prepared for the possibility that the trend will resume heading in the same direction even longer.

He goes on, when discussing support and resistance, to state that one cannot know if price will bounce off or break through such levels unless one considers whether price came into the level with strength or weakness.

But since I do not believe in trying to predict what price will do in the future, either way, I am going to adopt a “wait and see” mindset.

Rather than speculate based on whether price exhibited strength or weakness before becoming range bound, I will simply be prepared to enter a position in either direction depending on the trajectory price takes when it breaks free.

(The reason I refrain from doing the same thing—the reason why I am hesitant to look for a continuation of the trend—when a rate reaches the outer limits of an established price range is because, in almost every example of this kind, if the same trend is continued, it is only for a short period of time.)

 

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By Fractals, Barry means that a trader should compare the trend, retraces, cycles, and momentum in multiple time frames to ensure they are all in agreement with one another.

But personally, my preference used to be to plot all this information from the various time frames all on one chart so that I would not have to click back and forth between the different configurations/contexts.

However, my system has been refined to the point now that the only thing I genuinely care about initially are the green and black moving averages from the higher time fame setup, and the position/location of price relative to two sets of moving average envelopes. Until I like what I see there, nothing else really matters to me...

Then when the structure is right to begin considering entering a position, I kind of don’t care about the higher time frame anymore, and go to my 5- and 1-minute charts to pinpoint the exact time and location to execute the trade, if and when it ever arrives...

 

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I neglected to mention in the previous post that the two shades of blue moving averages in my short-term chart setup (below) exactly match the black moving average in the long-term chart above (in the middle) and the 3 lime green moving averages here exactly match the green moving average there; so I still like to have everything from all the time frames on one chart as much as possible...

 

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I just noticed the same thing...

There is nothing up above to stop it all the way back to 2011 if it is able to break above 1.0150. However, my numbers are suggesting that the pair is not likely to go much higher, or at least not for the time being.

 

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