5/1/06 to 6/1/06 Outlook Notes and Observations
Results:
Not good. The $1.2614 Short down to the $1.20XX level resulted in a 200+ pip loss on monthly Outlook trade of 100 lots. That's the second long-term trade that failed. One Swing and one Outlook, both Shorting against the "historical trend".
Of course, since the inclusion of the Annual TCD data, I now know that both of those signals would never have been allowed to come to screen and would have been overridden by the much larger Annual TCD Long probability which is still unwinding to the upside for this year. So, I'll have to wait until the Annual TCD Long Fill$ to near capacity and then watch the behavior of the smaller TCDs at that point. Can't wait!
New Developments:
Ok - the Annual data has given me a lot to work with - a playground of sorts - so, I'm still exploring a couple new ideas and have built a new tool for testing Day Trade entry points using the Annual input in a number of various ways. The goal in the way I trade is to capture a minimum number of pips
every 24 hours without fail – as close to 100% of the time as I can get while ALWAYS increasing the number of lots being traded
every 24 hours and using a
constant Cost Basis
every 24 hours.
High Trade Accuracy Daily + High Leverage Daily + Increasing Lot Size Daily + Fixed Cost Basis + Minimum Pip Capture Daily + Routine (Machine like) Execution = Geometric Growth of Capital over a very short period of time. That’s my money management formulary. Using this, I don’t have to strike gold each time I trade. I won’t need to capture 100 pips day and I won’t have to strike it rich over-night to make up for 50 bad Day Trades in a row. Smaller, consistent gains over time leads to millionaire or billionaire status in a relative short period of time. The key is consistently capturing at least a minimum number of pips that pushes the revenue growth forward according to a schedule of revenue growth over time.
So, every tool I build for this system is geared with that as its first protocol. The new tool must improve trade accuracy over time, or I cannot allow it into the system. With that in mind, I've created a new TCD Fill% Indicator that uses the previous day's TCD absolute value as the denominator in the TCD-F% calculation. So, instead of using the real-time TCD absolute value, I’ve created code that stores the previous abs value at the close of the previous session along with some other proprietary stuff. So, bottom line – my Daily TCD-F% values are different in this new test tool. This gives me two (2) Fill% types (real-time and static) to study in conjunction and hopefully a new hybrid TCD Indicator to add to the system.
Example:
EURUSD
Today’s Day Trade session (5/30/06 to 5/31/06) shows a TCD Short Fill% of 108.16% Real-Time and a TCD Short Fill% of 149.30% Static using last session’s (5/29/06 to 5/30/06) TCD Short Absolute value at the close. So, with this 108.16% real-time and 149.30% static Fill on Subordinate, I can more easily see that my “next” tradable move will be Long and back into the Dominant side as the probability for the Long move next session increases with every tic to the downside this session as long as the Dominant TCD remains Long.
Using Subordination and Domination in this way will always (by mathematical definition) place you one step ahead of the basic “trend trader”, as you will be “seeing” the “trend” shift
before others do.
Also, looking to switch to the GBPUSD! I’ve been trading the EURUSD for many years now exclusively. As time goes on and my account balances increase geometrically, all I really need to do is score a few pips per day with the least amount of resistance possible. GBPUSD typically runs between 120% to as much as 180% larger than EURUSD in Magnitude as measured by my 21 period Omega using Daily data. I only need 7 pips per day to move my Revenue Model forward
each day and strike my outlying revenue targets three (3) years down-range.
It is easy to get the absolute minimum pip requirement using EURUSD, and that minimum could be increased if I used GBPUSD. GBPUSD also tends to run more true in its TCDs (visually – I have not yet installed the data to confirm) at times relative to the EURUSD. Where the EURUSD seems to have larger draw-down, the GBPUSD seems to tuck in closer to the entry point reducing overall draw (visually – unconfirmed with data). So, at some point I will make the official cut-over to GBPUSD sometime soon. At the same time, the other side of that sword is that when the Day Trade entry is not optimal (meaning the system got the timing wrong), the draw-down will be bigger given the larger Magnitude of the GBPUSD.
So, there are no free lunches when shifting to a larger Magnitude pair as this places a huge premium on “Timing”. The better the Timing, the smaller the draws will be against the cost basis in each trade. If you are going to use a larger Magnitude pair, make sure you enter on good Subordinate Fill back to the Dominant side and make darn sure you know where the Dominant side resides – or that larger Magnitude pair will really draw heavily against your cost basis in the trade.
In addition, I’ve created another Predictive Indicator: Alpha-6. Basically, a variant of the original Alpha-4 and an improvement over Alpha-5. Alpha-6 has a sort of “fuel cell” built into it that give me an idea of the “magnitude of the probability”. This is new as it attempts to take measurements of the probability itself for the next TCD move. It shows the direction of the projection (Long or Short) then how much of that projected Long or Short is still remaining in the move.
So, it is really a signal that does two things: first it shows the next move as projected through Alhpa-4 and Alpha-5. Then it shows the probability for a “hold” in that direction – which is the part where it measures the staying power of the probability itself. Sort of like a dual purpose indicator and it works in ranging or channeling market conditions. The next phase of development for that new Indicator will be to modify its output once the market goes into a long-term Bull or Bear configuration. At that point, the Indicator will need to be feed more “opposition input” from the “historical trending” components within the system in order to town down the strength of its “predictive” output which will often times be in opposition to the historical trend. It will be a very delicate balance of using larger TCD time-frames to off-set some of the “predictive” nature of Alpha-6.
Advanced Discussion: (Rated “A” for Adults)
Lastly, I’m contemplating the creation of another Indicator that I will label as the: “TCD Stabilizer”. It will project the orbit of “price” as it rotates around the center line created between both TCDs. Basically, a shorter-term Price Structure Indicator which should fit in nicely to that series of indicators. For those of you that already know, no explanation is necessary. For those of you that do not already know, I don’t see price as
$1.2815, for example. What I see, is something “like” a vector quantity. Something “like” an electron orbiting its nucleus where the electron is what most people would observe as “price”.
The electron may indeed be an individual “particle”, orbiting the nucleus “independently”. However, that same “individual particle” is also part of (or, forming) an electron probability shell, or put another way, a
probability density. Without “price” actually existing along any specific point in the orbital path of its projected shell, I can expect that at some time (t), “price” should “appear” (for lack of a better term) at point (p), as long as the Price Structure is maintained, or is kept in a “normalize” state/configuration.
So, in this example – the Price Structure becomes the “Atom” or the atomic “structure” being maintained and at this level, predictability becomes very important. Whenever the atom begins to decay (in general terms) we call that an unstable atomic structure or going “radio active”. There are various forms of radio activity, but in this similarity, the price structure starts to behave as if it were undergoing Beta Radiation, where the nucleus of the structure becomes unstable – among other things. The orbiting electrons spun-off by a decaying nucleus create the instability. In the past, I simply called price structures that behaved this way, “Abnormal”. In the past, I considered these as being very dangerous and extremely volatile. You will find them hanging around periods where larger TCDs are
crossing each other. Like during the start of a new Weekly bar, Month bar, and Yearly bar.
However, I have learned some new things about what constitutes normal and abnormal behavior in Daily Price Structures given the addition of the Annual TCD data. Daily Price Structures (the harmony between the Long TCD and Short TCD) can be stretched and extended vertically (Bull or Bear) such that either TCD becomes overly dominant, without the price structure itself becoming “abnormal”. So, my definition of “abnormal price structure” has changed given the new Annual data. I can now see that “normality” in the Daily Price Structure is indeed tied to “normality” in the Annual Price Structure and that what I used to consider as an “extreme” TCD configuration over a prolonged period of time, can simply be the result of the
start of a brand new Annual TCD that was once Subordinate in its own time-frame. This makes perfectly good sense and it was sitting right under my nose all the time.
But, this begs the question:
Is there ANY Daily Price Structure that would be considered “abnormal”, or “Radio Active”?
If I always enter the trade to the Dominant TCD side, then I increase the chance of always trading a “stable” nucleus – one that is not spinning off volatile radiation. That’s the “easy” way to handle TCDs. However, a more advanced way to handle TCDs would be to also trade periods of Beta Radiation, realizing that Beta Radiation comes ONLY when there is
an excess of neutrons (TCD absolutes). So, the clue there would be to find those conditions when the TCD Absolute values are so massed in one extreme or the other (either Bull or Bear) that the nucleus (price structure) is imminent for creating Beta Radiation. Bingo!
Once I know that (plus or minus a few days or a few pips), I will know when the structure is about to enter into an “unstable” phase and thus, when entering the Subordinate (radio active) TCD is warranted with low risk and high probability. So, the key will be in research and trying to locate those times I history when the Dominant TCD became too “excessive”, making the nucleus of the atom (price structure) spew-out radio active Subordination in an attempt to
stabilize itself.
This of course, implies/suggests a General Theory for Price Behavior:
All price behavior “desires” to conform to a state of TCD equilibrium about a perfectly horizontal plane with a centerline/longitude separating the Long TCD from the Short TCD and having zero Dominance or Subordination characteristics.
If this is the “natural” configuration of the “price structure”, then this theory would truly redefine the definition of TCD. No wonder the Annual TCD Price Structure is flatter than all the rest! The EURUSD has only been traded for so many years and the
universe of possible “natural” configurations is extremely limited on such a large bar as compared to the Daily TCD Price Structure, for example. Hmmmm.
I think this general theory is very, very close to being a fact – at least in the markets I trade.
This would then (possibly) bring into existence a Special Theory of Price Behavior related to Day trade executions:
All Day trade executions from Daily Subordination into Daily Dominance result in “price” orbiting back to Dominance when the larger (Week, Month, Year, etc.) Price Structure is stable and when the Daily Subordinate TCD has penetrated that region within the Daily Price Structure which is inclusive of a high probability density for a return to Dominance.
Technically, this special theory of price behavior (based on TCDs) should (in theory) produce a Day trading system that never fails as long as three (3) conditions can be met:
1) An “exit” price target can be found that has a high probability density associated with it relative to the TCD base from which it comes.
2) An “entry” price target can be found that has a high probability density associated with it relative to the TCD base from which it comes.
3) Each trade is executed consistently on-time and each time the scenario arises.
So, this leaves me with the enticing thought that:
General Theory of Price Behavior + Special Theory of Price Behavior = zero failed Day trades.
This is in theory, of course, and this does NOT include that sometimes brutal wild card known as adverse news. Likewise, it also does not include that lovely wild card known as
supportive news, either! 50% of the time, news will work against you and 50% of the time (in the aggregate) news will work in your favor – in the aggregate.
Anyway, outside the box thinking is outside the box thinking, no matter how you approach it or how you slice it. Back to work I go. I just love this business!
