Jim,
Thanks for the reply and references. When I
began this game I studied just about all the cycle methods available
including Hurst and Delta. I doubt that there is a cycle book of note that
is not in my library. I concluded that there was just to much
variability in the accuracy of the trend change forecasts from cycles to
give me an acceptable trading methodology. Now, I admit this is a personal
thing - I just cannot stand drawdown and waiting to be in a profit position
as is required when trading with cycles.
But there was something else about cycles -
they told me nothing about the why of market moves and I wanted something
that was more science than art.To believe that markets moved according to
planetary positions or some physical number periods just was not
acceptable.
It was not until I began to study chaos theory
and the psychology of traders that I developed a methodology that satisfied
my curiosity as to why markets reverse and to give me an indication of
reversal that was close enough to trade with. I set as my goal a +/- one
period accuracy on reversals and a 70% to 80% reliability on the trading
signals , performance which I have documented over the last ten
years.
Now this is not to say that I don't believe
that cycles exist - I certainly do. They just do not satisfy my criteria for
a trading methodology. Others may be able to use then
successfully.
Now regarding the discussion of the importance
of volume. I also have no found no reliable way to use volume as a trading
tool. However I do use measures of tic direction to give me readings on the
sentiment of the market and changes in sentiment leading to price
reversals. I use these every day.
Jim White
----- Original Message -----
Sent: Tuesday, January 19, 2010 7:40
AM
Subject: [RT] cycles
Hello Jim!
I would cycle analysis is more of an art than a science;
I think
even those who follow them would often wonder if they are there
- at
least at times. However, I might agree with you on the
'static'
comment, as the cycles that I track always have an average
variance
of plus or minus 20% in either direction.
A similar
notion could be applied to Elliott-wave; it is more of an
art than a
science - but there are some who are very adept with it.
As far as
statistical validity, I would doubt you would find any hard
evidence of
that in any trading method (other than something
slightly
above-average). if there were something that worked 100%
of the time,
then please let us all know as we would like to use it
:-)
as for methodology, I am going to reference Hurst's 'Profit
Magic',
along with Raymond Merriman's book 'Cycles and Patterns in the
market'.
these two are a good starting point for those interested in
cycles. take
what you find useful, discard the rest - and then add
that to what you
come up with yourself. it is certainly an evolutionary
process.
where is Clyde Lee when you need him? :-)
thanks
for the
message
Jim