Cycle Theory

[expiated]

Wednesday / October 16, 2019 / 10:30 p.m. PST

I have no more questions I feel I need answered with respect to this little adventure, so I'm going to suspend my exploration of a possible cycle theory trading system and spend the remainder of this free trial messing around with the FTMO Challenge.

 

[expiated]

I'm going to suspend my exploration of a possible cycle theory trading system and spend the remainder of this free trial messing around with the FTMO Challenge.

Interesting language in the FTMO Terms and Conditions (emphasis is my own)...

If the Member satisfies the conditions listed in article 6 of the Conditions within the period stated in section 2 of this article, the Association may offer him or her the conclusion of a contract with the Company FF trader Ltd.

The Association has the right to refuse to conclude the proposal of a contract with the Member on entering into the Contract on Management of the Special Demo Account with the Member, if during the period when services are provided, the Member conducted trades on the Demo Account contrary to how trades are to be conducted on the FOREX market or other financial markets or in a way that constitutes legitimate concerns that the Association may suffer financial or other damage due to the Member's activities. In such case, the Association shall not return the Member Fee paid for the corresponding variant of the Demo Account to the Member.

Seems to me that “The Association” could say, “Yes, you passed our test, but we never promised you a contract. We only said we might offer you one. However, in reviewing your performance, we have decided that you met our conditions in a manner which we are legitimately concerned might ultimately result in our suffering financial damage, and therefore regret to inform you that we are opting not to make you the offer after all...sorry.”

By the way, what in the world does it mean to offer someone "the conclusion of a contract"? This is a nonsensical statement in American English! (Perhaps it is some type of British expression with which I am unfamiliar...maybe?)

 

[expiated]

A contributor to this forum who goes by Turveyd says that he currently trades DAX and NQ on a one minute chart using SMA (13), a 24-period EMA (envelope 0.01% to make it fat), and BB SMA (13) 3.0 and 1.5.

I too was planning to use SMA (13) to trade the major indices, but in addition to this I intended to use three other moving averages and a Donchian channel.

In trying out this approach however I found that two of the three other moving averages merely served to confused what was happening with price action, so I deleted them and am now trading with just the two moving averages that are left (and the Donchian channel) and things have been going better since then.

I also discovered that the amount of money involved in each trade was much greater than what was involved trading Forex.

 

[expiated]

Thursday / October 17, 2019 / 10:05 p.m. PST

I will not be trading the S&P, Nasdaq or Dow based on Cycle Theory, so this is the last entry I am posting here in this thread, and I will continue recording related thoughts in my Duxon's Archive thread.

For the time being at least, I am opting to delete SMA (13) and the other standard moving average from my 1-minute stock index charts. I have plotted a proprietary moving average I coded myself in their place, with the idea of entering long positions when price action is taking place above the line, using the Donchian channel to help recognize and set stop losses, take-profit targets, and pullbacks; and doing the opposite when price action is taking place below the line, provided the line is clearly sloping in one direction or the other (i.e., up or down).

 

[expiated]

I will not be trading the S&P, Nasdaq or Dow based on Cycle Theory.

Wait a minute...that's not really true. The fact that I am still using a Donchian channel means I am still relying on a time-based cycle from my perspective, given the way I am conceptualizing cycles. It's just that the time interval is very short, so no need to switch to another thread after all.

 

[expiated]

Friday / October 18, 2019 / 730 a.m. PST

I made three successful trades in my Purple Trading trial account this morning, two before the New York session began and one afterward for a total gain of $1280 using 8.00 volume/trade size and and unacceptable risk-to-reward ratio with respect to stop loss and take-profit levels—total fantasy trading. I changed the setting on the Donchian channel to almost double what it was before and am likely to leave it there.



So at this point, I am satisfied with my chart configurations for both Forex and stock indices (stock index futures). There's not really anything else to do with this thread unless I take a look at metals/commodities perhaps, so maybe I'll do that just for the fun of it.

UPDATE: Well, that didn't take very long at all. I would essentially trade gold and silver the exact same way, with the exact same setup, that I use to trade Forex.

 

[expiated]

Sunday / January 26, 2020

I supposedly came up with my final chart configurations way back in September 2019. So why then have I made so many changes since then? I think it’s probably because I’m not doing anything differently, but am simply doing the same thing with slight variations. It’s not so much that I’m making changes as it is that I’m making adjustments.

So will it ever stop? Probably. I haven’t changed my daily charts in months! My five minute charts have been exactly the same for two weeks now, and I didn’t so much change my one-hour chart yesterday as merely adding a second version of it—one with a slightly different perspective.

These charts are giving me a nearly 100% success rate, so I am not looking to change them at all. In fact, the supplementary one-hour chart was an accidental development that occurred when I translated my daily charts down to the lower time frames to illustrate how the fractal market hypothesis applies to my system. I was not actually TRYING to make any changes, so I SHOULD be all done.

I don’t know how I was trying to incorporate cycle theory before, but I know how it applies now, I have returned to this thread to squeeze it into my most recent thoughts, since I realized just a minute ago that it was missing...

The point of view from which Numerical Price Prediction scrutinizes the market just might spark a sense of familiarity in traders acquainted with a concept known as “fractal market hypothesis,” which is an alternative investment theory to another way of seeing markers referred to as “efficient market hypothesis.” The efficient market hypothesis is a theory that evolved from a 1960's Ph.D. dissertation by Eugene Fama which posits that markets are efficient, meaning the current price of any given financial instrument is always fully representative of the asset’s true value because asset prices reflect all available relevant information.

However, fractal market hypothesis, formalized in 1991 by Edgar Peters, views financial markets as fractal in the sense that they follow a cyclical and replicable pattern. Note that fractals might be defined as “fragmented geometric shapes that can be broken down into parts which replicate the shape of the whole.” So then, fractal market hypothesis believes technical analysis is possible because one can see the fractals—the replicating geometric patterns—in which prices move through time. Analysis is therefore focused on the price movements of assets based on the contention and central premise that history repeats itself.

Following this framework, Numerical Price Prediction (NPP) collects and analyzes arithmetic data related to trends, average price ranges, horizontal support and resistance levels, and market structure, and then interprets this data in light of established reoccurring price patterns to inform a decision-making process based entirely on mathematical odds and statistical probability—a process that accurately projects where price is likely to be in the not-too-distant future.

So in addition to its being no surprise that Numerical Price Prediction might elicit thoughts of fractal market hypothesis, one could also reasonably expect it to bring cycle theory to mind—the idea that cyclical forces, both long and short, drive price movements and can be used to anticipate turning points—for this too is exactly what NPP is designed to do.

So let's see how it works...

 

[JMtradeforex]

Interesting language in the FTMO Terms and Conditions (emphasis is my own)...

If the Member satisfies the conditions listed in article 6 of the Conditions within the period stated in section 2 of this article, the Association may offer him or her the conclusion of a contract with the Company FF trader Ltd.

The Association has the right to refuse to conclude the proposal of a contract with the Member on entering into the Contract on Management of the Special Demo Account with the Member, if during the period when services are provided, the Member conducted trades on the Demo Account contrary to how trades are to be conducted on the FOREX market or other financial markets or in a way that constitutes legitimate concerns that the Association may suffer financial or other damage due to the Member's activities. In such case, the Association shall not return the Member Fee paid for the corresponding variant of the Demo Account to the Member.

Seems to me that “The Association” could say, “Yes, you passed our test, but we never promised you a contract. We only said we might offer you one. However, in reviewing your performance, we have decided that you met our conditions in a manner which we are legitimately concerned might ultimately result in our suffering financial damage, and therefore regret to inform you that we are opting not to make you the offer after all...sorry.”

By the way, what in the world does it mean to offer someone "the conclusion of a contract"? This is a nonsensical statement in American English! (Perhaps it is some type of British expression with which I am unfamiliar...maybe?)

It's written by a Czech lawyer in English thats probably why. It should probably say 'to conclude a contract'