SUNDAY / AUGUST 30, 2020 Numerical Price Prediction (NPP) was developed through the application of two major biblical principles: (1) testing all things and holding fast to that which is good; and (2) gaining insight into how one should interpret the signs of the times. Eventually, these principles led to the formation of a system (NPP) predicated on two core beliefs: A carefully chosen moving average is the best prognosticator for predicting the direction in which price might ultimately be headed within a particular temporal context—with one specific, painstakingly selected moving average filling this role better than all others—otherwise known as a baseline. Generally speaking, exchange rates will separate or distance themselves only so far from a given baseline before one begins to observe the phenomenon of regression toward the mean (or mean reversion) come into play. In this sense, NPP conceptualizes price action as waves of designated frequencies cutting swaths of area inside the market domain with an observable degree of directionality. This suggests a reliance on mathematical odds and statistical probability, with the decision-making process involving as little subjectivity as possible—a data crunching system where the level of success is dependent on the degree to which one is willing to do exactly what the numbers demand and nothing else because the numbers are all based on objective reality. It is the reason this approach is called "Numerical Price Prediction" and why cycle theory and the fractal market hypothesis play a role in how it is executed. It attempts to use a methodology similar to the numerical weather prediction protocols applied by meteorologists when making weather forecasts; that is, the collection of precise, up-of-date, quantitative information at a given time and location followed by an interpretation of this data to make accurate predictions. But instead of analyzing humidity, temperature, barometric pressure, wind velocity, cloud formation and the direction of air currents; it focuses on moving averages, typical price ranges, historical support and resistance levels, market structure and repetitive price patterns—all in multiple time frames. So as with life, a key to success is a mastery of relationships. But as with numerical weather prediction, market forecasts are significantly inhibited by intrinsic predictability limitations, which lead to error growth with time. So in a way, the level of accuracy attributable to a given market forecast might be thought of as being governed by yet another Christian principle—that of subsidiarity, which holds that operations conducted in immediate proximity are accomplished with much greater efficiency and efficacy than those handled more remotely. This is why the system is applied almost exclusively to intraday trading using five- and one-minute charts. At this point in time, NPP conceptualizes the four-hour price range as the intraday foundation on which foreign currency pair price action is built—the backbone of the Forex market, on which the rest of the "body" is constructed. Nonetheless, it is the 90-minute baseline that is used to determine the ultimate direction in which price is headed at the intraday level, which of course implies it should also be used to detect full-fledged intraday reversals. Though the 90-minute baseline determines the ultimate direction of price, the 30-minute price range envelope, otherwise known as the “TUBE,” is what rules when it comes to projecting where price will eventually head in the immediate future. Establishing the direction of the short-term trend is accomplished using the five-, ten-, and 15-minute baselines, referred to as "the short-term cluster," along with an associated moving average "flatworm" envelope. This indicator replaces what was known as the "bubble worm" envelope, which is no longer plotted on the main chart, but is still utilized in that its parameters are applied to the lower panel to generate an oscillator used for determining entry levels. Note however that the bubble worm oscillator is not an automatic signal to execute trades. Rather, it serves as an early warning alerting one of the fact that the right conditions for entering a position might be just around the corner. The next step is not to make a trade, but to instead ask (and answer) six questions with respect to the five-minute chart configuration: Are the candlesticks painting beyond the interior of the flatworm envelope? Are the candlesticks painting beyond the interior of the TUBE? If so, are the candlesticks located on the exterior side of the flatworm envelope that is opposite the envelope’s trajectory and/or that of the TUBE? And/or are the candlesticks located on the exterior side of the TUBE that is opposite the direction of its trajectory? Are the candlestick painting beyond or near the projected top or bottom of the price range corresponding to the 90- or 240-minute baseline, or that of the intraday or daily price range? Has the instantaneous price range envelope begun to reverse direction? Whether or not to execute the trade and exactly when to do so will depend on the answers to these six questions (and possibly how they relate to one another). So then, other than when there is a full-fledged reversal in the 90-minute trend, probably the most profitable setup is when candlesticks are coming out of a pullback in which the short-term cluster was on a temporary trajectory headed in the direction opposite the slope of the 30-minute price range envelope, especially if it (the angle of the TUBE) is also aligned with the slope of the 90-minute baseline. That said, and as implied by the six questions listed above, it is probably a good idea to avoid (or pass on) entering positions until and unless candlesticks are forming to the outside of the flatworm envelope on the far side away from the trend, or at least until the appropriate/corresponding band(s) of the short-term envelope(s) have made contact with it ("it" being the "outside" band of the flatworm envelope). One might also find it advantages to refrain from doing so until and unless the flatworm envelope is angled in the same direction as the slope of the TUBE. Note also that the probability of trades ending in success appears to be increased even more so if positions are entered to the outside of the TUBE, especially if near the projected limit(s) of the 90- and/or 240-minute price range. So then, it is important to pay particular attention (be watching for reversals) when there is a convergence between the upper or lower bands of the flatworm envelope, the TUBE, the 90-minute price range envelope, and/or the four-hour price range envelope. To avoid getting stopped out, the trigger signal for entering positions when one observes the structure/situation described above is when the candlesticks crossover or begin forming to the "inside" of the five-minute baseline on a one-minute chart, or as already mentioned, when there is a reversal in the instantaneous moving average envelope on a five-minute chart. (If you want to be extra safe, you can wait for the candlesticks on the five-minute chart to cross over the ten-minute baseline and/or for the ten-minute baseline to reverse direction to realign itself with the slope of the TUBE.) All of this suggests that the opposite side of the flatworm envelope is a reasonable and conservative level at which to lock in gains, with the opposite side of the TUBE being a more aggressive/ambitious goal. Also, about the only time the short-term trend oscillator on the one-minute chart configuration really comes into play is when there is a breakout (as suggested by the five-minute baseline) where it looks like an asset is starting to trend with momentum (i.e., has initiated a run) and one wishes to identify an optimum level from which to get in on the journey. (Possible take-profit targets are the ten-minute price range at 0.15% deviation, or the closest of the three 90-minute price range levels, or the four-hour price range, or the intraday price range...given that the candlesticks will already be forming to the outside of the flatworm envelope and the TUBE.)
One might also find it advantages to refrain from doing so until and unless price is located to the outside of at least the first degree of deviation from the 90-minute baseline.
Note that you could have made a lot of money (relatively speaking) on these three ideas from yesterday had you entered positions according to what's written above...
So, see what happens if you evaluate price action given the following with the above in mind... Theoretically these five pairs should be looking to fall: EURAUD EURGBP USDCAD USDCHF USDJPY Theoretically, these eight pairs should be looking to rise: AUDJPY AUDUSD CADJPY EURJPY GBPJPY GBPUSD NZDJPY NZDUSD
Thus far I have only seen fit to try applying the above strategy to EURAUD and USDCHF, so I've yet to get a sense of how well or how poorly it might work. I would have liked to have at least gotten a dollar out of this trade, but when I opened the platform after getting home this evening the pair had already begun pulling back before I could adjust my take-profit target and stop loss.
Given that I am trading with a lot size of merely 0.01, I found the first two returns from the present daily market cycle (98ȼ and 84ȼ) to be respectable. But they were followed by a big loss of -$1.32. That was somewhat mitigated by the $1.01 return that followed, but this was immediately wiped out by another big loss of -$1.36. The next trade trumped everything however, returning $1.50. With nothing else to do, I began converting the final five-minute chart configuration I’ve been using since last week to my 15-minute charts, just to see what it would look like, and was struck by how well the typical maximum bar length on 15-minute charts was defined. In looking over the above performance and how it matched up with price action, it occurred to me that if I replaced the moving averages and moving average envelopes on my five-minute charts with my own adaptive price range envelopes, which read the fifteen-, thirty-, and sixty-minute price ranges precisely and exactly rather than approximating them as standard indicators do, I could be entering positions at critical/key levels where the three timeframes converge, thus minimizing the odds of entering losing positions. Doing so meant that there were no more big wins, but it also meant there were no more big losses either, and in fact—it meant there were no more losses at all! Of course, this simply echoes what has already been observed, that as with numerical weather prediction, market forecasts based on numerical price prediction are significantly inhibited by intrinsic predictability limitations that lead to error growth with time.
It became necessary to switch to a strategy like the one mentioned in Post #53 when assets such as those pictured below failed to follow through on their present day-to-day (bearish) trajectories.
Tuesday / September 1, 2020 / 7:15 PM PST I opened my OANDA MT4 platform shortly after 6:00 PM PST, and upon further evaluation of 15-minute charts, felt they suggested that selling an asset above the 30-minute price range or buying an asset below the 30-minute price range might often lead to profitable trades. I therefore set up a one-minute chart accordingly and bought NZDUSD the next time if fell below (at 6:13 PM). I collected on the trade in like three minutes and couldn’t resist trying again with NZDJPY. My goal was only two pips profit, but I think next time I should shoot for four or five in that this still looks to be pretty safe and almost a sure thing. (Theoretically, even 10 to 20 pips might not have been too much to ask.) I should note however that what I am using is not the “real” 30-minute price range because I am too lazy to write the code, which if I ever do, is going to be an arduous and daunting task. Hence, I am using the next best thing (indicator) instead, and even this one is generated using only a sampling of data rather than a full set, which accounts for its “rough” appearance.
Wednesday / September 2, 2020 / 6:30 AM PST I haven't been using 30-minute charts because the timeframe didn’t fit any of my strategies, tactics or techniques. However, the above observation regarding the 30-minute price range motivated me to give the charts a second look, which in turn led to a trade that returned $2.43. I would like to try to duplicate this, and perhaps trades that are even more profitable, again and again, if possible. The chart aids in picking optimum entry levels for positions with a longer-term outlook (closer to a swing type of trading style than that of an intraday or scalping kind of trade). And to my surprise, these charts are suggesting to me that it was a mistake for me to have been using 60-minute charts in the first place, or at least to have been using a 60-minute baseline, because the indicator simply lags too far behind the “actionable” intraday price action. UPDATE: But this makes perfect sense in light of the following observation from Post #251... And indeed, the 90-minute baseline does still determine the ultimate direction in which price is headed.