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Walt Downs wrote:
>
> Fellow RT'ers,
>
......
> judging from Rick's last response, I can see that our current thread
> The Trex SETUP:
>
> I use a proprietary formula to determine the building of the time and
>
> price levels for a market. This formula consists of a "living" ratio.
>
> I allow points in the market which have statistically shown me their
>
> signifigance, to build the ratio for me.
>
> Sound like Gann or Fib theory? It isn't, and here is why it isn't, and
>
> why I feel this approach is better than Fib or Gann sequences:
>
> Fibonacci and Gann:
>
> Both these methodologies use a slightly different sequence of
>
> "NON-LIVING" ratios. These ratios do not change with the underlying
>
> market. The formula for their application is similar:
>
> 1. Find a signifigant hi to hi, lo to lo, hi to lo, lo to hi....etc
>
> and apply the ratio to the distance between the points in order to
>
> determine where the market will turn.
>
> People also apply this ratio methodololgy to days as well....
..... this viewpoint based on YEARS of statistical studies I
>
> have run on major Fib and Gann sequences, and their derivitives, both
>
> on price and on time. Throughout the testing periods NO major Gann or
>
> Fib set proved itself statistically signifigant enough to trade, and
>
> NO subset proved itself statistically signifigant enough to trade.
NW: Walt, I would like to know what Gann methods are you nvestigating?
This doesn't sound like the Gann I know. Were the methods you tested
Astrological? Afterall, the main thrust of Gann's work was Astrological,
at least that is what Gann's partner of 10 years told me. The other
stuff was just the fine tuning dial on the Gann radar screen. Fellow
RTer Clyde Lee previously presented an excellent study and proof that
the Lunar Cycle has a statistically significantly correlation with many
markets. Is this the sort of study you are discounting?
Gann would have replied to your criticsm of using ratios that you can
not use them at random. These are to only be applied at the key times,
when time and price come together. This is first determined by the
planetary cycles. Walt, is this the Gann approach you tested?
As for your concept of "living ratios" my guess is that it's a fancy
way of saying you are tuning the analysis to the market, i.e. pattern
recognition. Analyzing and forecasting the market is much like playing
"Name That Tune". You are given a few notes and must guess the rest in
advance. It is silly to assume that every tune is going to be written in
the same key, just as the market periodically changes keys and "tunes".
This usually happens following an important turning point in the market,
i.e. when the market turns it is like striking a tuning fork which
manifests the nature of this new wave. All harmonic movement of the new
wave should be tuned to this key. I qualified this because this is
always some noise factor. Being able to distinguish the noise from the
music of
the market is also very helpful in trading.
Recently, it was my thinking that the US stock market has been in a
Elliott wave IV of minor level. I knew the level to watch (SPX 893) for
two weeks in advance and also forecastted Aug. 18 as the low day for
Aug. I knew that if SPX 893 area held, that the market was "singing" to
a harmonic series that is usually only found in Wave IV and if that
level held for the next several weeks and a new high is made that we can
forecast the next low with a very high confidence level. This harmonic
series is not on the usual Fibonacci harmonic series, but is indirectly
related, as it does have the Fibonacci ratio as a component of its
result.
Anyway, not to ramble, this stuff words pretty good if you know how
to use it correctly. Unfortunately, very few do. In short, Walt you are
correct in that you can not use same ratio(s) indiscrimately. This would
be like turning on the radio and always expecting to hear Beethoven's
5th Symphony just because that happened a few times before. You are
wrong to imply that the only way to use those fixed ratios is randomly
and indiscrimitaley. It is not an all or nothing situation. Perhaps
there are applications of these harmonics of which you are not familiar?
Although the market does exhibit different patterns at different times,
most of the time they are harmnically related. Then, the question comes
down to what prices and what times are the important ones that are worth
trading?
Without the answer to this final question in advance, one is reduced to
the myopic focus of very short term trading, analegous to a blind man,
trying to figure out what is before him, measuring an inch at a time the
dimensions and proportions of an elephant. Having a schedule that the
circus is in town and that the Elephant parade is due to go by at that
particular time surely would be a great aid to that blind man.
Harmonically,
Norman
>
> In other words, you could never know with any real sense of confidence
> WHICH set or subset was going to prove to be the right one.
>
> Therefore: whether Fib or Gann truly calls market turning points is
> irrelevant. A single trader, unless he has an HP3000 mini-computer to
> do all of the calculations on Decade,Year,Month,Week,Day,minute and
> tic, and can get a few of these points to line up, hasn't a prayer of
> anything better than a random chance of picking the correct
> turning point. Even with the computer your chances of picking a
> SIGNIFIGANT trading reversal are about 1 in 25. Unless, of course
> you pick so many points, that you can't miss. :)
>
> This is my analysis and my viewpoint, but it wouldn't be fair unless
> I quoted some exceptions, and explained why indeed they ARE exceptions.
>
> Joe Duffy and W.D. Gann:
>
> If my arguments and Premis are correct, how is it that W.D. Gann was
> so successful at trading stocks, and Joe Duffy has been successful at
> trading commodities using these ratio sequences.
>
> It is my contention that these two traders happened to simply be
> EXCEPTIONAL traders, with a natural gift for trading. The
> methodologies they used were of no signifigance. Their analysis and
> understanding of the markets they traded, their patience,
> discipline and innate skills, are what made them successful.
>
> These traders could have traded the numbers off of their laundry
> lists, and been successful doing it.
>
> The proof of my argument:
>
> OK, we have mentioned W.D. Gann and Joe
> Duffy. Name ONE other trader who has successsfully traded, real time
> real money, using these methodologies. If you are out there, please
> speak up, because I haven't found you yet. :) I am not talking about
> one or two trades, I am talking long term profitable (5 years or more)
> I am not talking hypothetical mumbo jumbo, SHOW ME THE MONEY. Unless
> I am really missing the boat, and despite the fact that it is
> tremendous fun, isn't that why we are trading?
>
> I am not stating some sort of idiom here, I am simply telling people:
> I have analysed these methods, and this is what I found. Because Of
> what I found, I do not utilize them except in the context of how
> other traders trade them.
>
> THE TREX DIFFERENCE
>
> Since, for my own trading I did not feel comfortable with what Fibonacci
> and Gann theory had to offer, I started looking for another way to find
> turning points that could PROVE to me that they gave me a signifigant
> statistical edge. Hence the birth of TREX market levels.
>
> Rick asked me to define what a "turning point" day is to me, and this
> seems reasonable. So here is my idea of what a turning point day is:
>
> TURNING POINT DAYS
>
> A turning point day is a SIGNIFIGANT market reversal.
> I usually define "signifigant" in cash terms of $500.00 or
> more. I am willing to trade in the higher volatility environment
> because I know the reward will be worth it.
>
> My definition of a successful turning point is that it must come
> extremely close to the TREX reversal point. If the market stalls
> 20 points from the TREX line, and then starts to move away, obviously
> I am not going to sit there like a zombie. I am going to take the
> trade, and place my protective stop below the TREX line.
>
> A less aggressive trader might wait only for the price to hit or
> trade through the TREX before initiating a trade on a reversal.
>
> HOW THE TREX POINTS ARE ESTABLISHED:
>
> ONCE a TREX setup has been established, a mathematical formula then
> starts tracking the TREX level and the day. From that point on, each
> day will produce a TREX level for the day. If you were to view this
> on a chart it would look like a trendline.
>
> A statistical time and price has now been established which will
> enable a trader to judge if the market is high or low.
>
> Some TREX lines might never be hit, but when they are hit, then
> the time and price parameters for that day have been met, the
> market has gone too far, and a reversal is likely.
>
> Now the trader doesn't have to worry if the "reversal" he is
> seeing is a high or a low.
>
> So, the main difference between Rick's philosophy and mine is
> that I don't really care WHAT day the reversal happens on.
> I only want to know that at a certain date and time the market
> WILL very probably reverse if TREX parameters are met.
>
> IN COMPARISON:
>
> A "Time Day" methodology will say :
>
> "On Jan 25th the market will reverse"
> Sup/Res at: XXX, XXX, XXX, XXX, XXX, XXX
>
> TREX would say:
>
> On January 25th, if the market hits ONE PRICE it will
> reverse. You have a 75% chance of success. Your protective stop is
> below the TREX level. Your maximum risk is the difference between
> your purchase price and the TREX line. Your Maximum gain is $500
> to infinity.
>
> I like this better :)
>
> WHERE TREX IS AT RIGHT NOW:
>
> We have done the warm and fuzzy stuff, but now let's review the
> current state of TREX.
>
> Most of the testing has been done via brute force calculation,
> because the TREX program for TradeStation is still being
> written.
>
> I will be happier when I can present statistical runs to prove
> the system's veracity over time.
>
> I can show many examples of charts with the TREX methodology
> applied, but I prefer not to do that, because It doesn't
> prove anything. I did show the turning points on the
> British Pound because I thought people would find it
> interesting. Also, when Rick laid claim to no other system
> picking turning points better than time days, I posted the
> TREX gif to show that YES there were methodologies that
> could do much better (In my opinion of course.)
>
> Eddie, was kind enough to give me a site on the RIT forum.
> What I would like to do as soon as my RIT page is fully
> functional, is start posting some of the TREX levels for
> people to watch. That way we can see them in action.
>
> Their success or failure will be an interesting test.
>
> Walt Downs
> CIS Trading
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