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Originally Posted by **Brumby** I have reviewed your white paper but unfortunately they are absent of key contents that would be helpful to understand your VRM model and how to trade those levels.
I will go through each of the issues :
1)Your paper does not explain the algo logic from which the 24 levels are generated other than it is based on current historic data. The problem is that without understanding the logic, the 24 projected levels become meaningful to the extend that it is some mathematical calculation but nothing more.
2)There are no empirical data in support of which of these 24 levels are important in terms of statistical relevance. As such, it becomes rather meaningless because of expansive quantity absent quality. In contrast, trading Gann 1/8 levels, fibo retracement and expansion or simply pivot levels would offer a simpler trading approach.
3)IMHO, conceptually your trading model may be built on some circular reasoning whereby your premise is actually assumed rather than proven. My assessment is based on what you stated in your white paper "In summary, financial markets do not move randomly, but move about the levels determined by the VRM." The key question I would ask you is what causal relationship have you empirical established that allows you to surmise that financial markets moved about the levels determined by the VRM? It seems to me your statement is a presupposition rather than a fact. |
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Thank you for your three points which I reply to below
1.) The algo logic starts by treating time as the tick of a clock rather than a real variable. After all you can never reach the point in space given by velocity multiplied by time when time = PI hours (3.1415926...). The algo therefore uses as input data, daily high, low and close values. The algo uses highly non-linear maths to relate sequential daily data and needs at lot of historic data to find the function. When the function has been found then the future is just one step away. Just input today's high, low and close and out drops three levels for tomorrow. That is just the start. Now I can combine daily data and get high, low and close every two days. And repeat the process and get another three levels over the two day time scale. And repeat up to the 8 day time scale using high, low and close over 8 days. So that gives 24 levels altogether. Each triplet of high, low and close (Hn,Sn,Ln) you see presented each night relates to a timescale used for the calculation. The whole process is repeated every night using the daily high, low and close that came in. The whole process is repeated every weekend using weekly high, low and close data. This is where the lack of data posses a challenge. There is not that much weekly data available so the algo exploits the fractal nature of financial markets to overcome this restriction.
2.) The Sn levels presented each night and each week are sentiment levels at the nth time scale. Until the market breaks through the top most Sn then the market is still bearish. Similarly until the market breaks through the bottom of the Sn levels the market is still bullish at some time scale. So the highest and lowest Sn are important. I also believe that S1 is significant from experience. The Hn and Ln are the extremes of price movement that are predicted by the algo for each time scale. That is why I call the algo the Volatility Response Model. News comes in and the market becomes volatile. Quite often some levels are duplicated or close together within 2 pips so you can discard at least one of them. Usually there are less than 24 levels when you discard. To reduce the number of levels on your chart you could try adding the first 5 above and below the price action and add further levels as needed if the market becomes volatile.
3.) The algo is highly non-linear maths that finds a relationship between succesive hstoric high, low, close data. Once found it is set in stone. When the next future high, low, close data is added to the data set the algo absorbs it and predicts the next future time interval. The causal relationship established by the algo is that a mathematical relationship can be found between sequential high,low, close data. And this relationship remains the same between today's end of day results and tomorrow's results still to be determined. The predicted levels of the algo are the structure about which the price action will move tomorrow. Each night I present GBPUSD predictions and at the end of the market in New York I present the price action about the algo levels. The proof of the pudding is in the eating as the saying goes. Interestingly quite often algo levels today will be also levels tomorrow. That is a level found today at one time scale will become the same level tomorrow at another timescale. |