A month or two ago, after having more or less finalized my trading system, I purged the notes on my laptop of all the moot observations I made in the past. But in the process, I accidentally deleted my description of Numerical Price Prediction. So today, I went back in my archives to find it so I could copy and paste it back in my personal notes. I'm going to paste it here as well though, so I won't have to go searching for it in the future if I need it again. (I'm not likely to add a lot more entries to this thread). Also there are some changes I need to note in the latter paragraphs. Numerical Price Prediction (NPP) Explanation Copyright © 2021 Fred Duckworth Numerical Price Prediction is an approach to trading foreign currency pairs that I came up with based on five biblical principles: The first being to test everything and hold fast to only those things which prove to be valid and reliable. The second was a belief that, as in life, when you have a system operating at peak performance, more often than not, it's at least in part due to the interactions between its various components evidencing strong, healthy relationships. The third is the fact that the best of plans are typically established in the presence of a multitude of counselors. The fourth is the necessity of being able to rightly interpret the signs of the times. And the fifth is that, once again, as with life itself, positive outcomes are usually the result of having made good choices. The first principle led me to reject the use of almost all common indicators, such as MACD, RSI, CCI, stochastic oscillators and the like; along with any approaches involving harmonic patterns, Elliot waves, pivot points, Fibonacci ratios and whatnot. Instead, I attempted to rightly interpret the signs of the times by devising a methodology similar to that used by meteorologist to predict the weather—one based as much as possible on statistical analysis and mathematical probability. The idea was to gather and evaluate precise, up-to-date, quantitative data and use it to calculate the odds of price reaching designated values within a given time period by patterning the system's elements after the equations, wave functions, and computer models used in weather forecasting. But, instead of monitoring wind velocity and direction, cloud formations, humidity, temperature, and barometric pressure; I evaluate the synergy (or "relationships") between such factors as typical price ranges, reoccurring chart patterns, horizontal support and resistance, trend lines and market structure (which is to say, "a multitude of counselors that proved to be valid and reliable" over several weeks and months) all in multiple time frames—with the result being a graphical depiction (computer model) of current conditions that I could then use to help me make precise, well-timed trades (or in other words, "good choices based on rightly interpreting the signs of the times"). The system incorporates the idea of cycle theory, which holds that cyclical forces, both long and short, drive price movements, and can be used to anticipate turning points. It's also compatible with Edgar Peters' fractal market hypothesis, which views financial markets as fractal in the sense that they follow cyclical and replicable patterns—ones consisting of fragmented shapes that break down into parts which then replicate the shape of the whole. I used these cycles to generate what some call "baselines" by conducting a thorough analysis to first uncover the cyclical waves formed in the wake of price action, followed by the defining of their general frequencies and magnitudes; and then finally plotting centered moving averages that came as close as possible to approximating the zero amplitude of the corresponding waves/cycles. So, the notion that there are no "best" moving averages to use when trading is not one to which I subscribe. Again, at the heart of my system is the use of carefully selected baselines which I calculated in the manner explained above. (By baselines, I mean painstakingly selected moving averages able to rightly discern whether price is rising, falling, or maintaining its altitude within a particular time frame.) However, it is not enough, in my opinion, to stop at merely determining which are the best moving averages to use when trading charts of a given time frame. To trade with the clarity and precision I desired required me to carry out one final step in which I assigned a specific temporal value to each individual baseline and its corresponding or associated price-range envelope—to answer the question: What moving average best conveys in which direction and by how much price moves every five minutes? Or every thirty minutes? Or every four hours? Or even every day? Determining the specific moving average that best represented price movement for each of the major time intervals along with their corresponding price range envelopes seemed to be the final step I needed to carry out in order to complete the development of my trading system to my full satisfaction. And yet, even after this "final" step, their emerged still another aspect to interpreting price action that proved deserving of my consideration which I had not envisioned at all—the concept of "temporal" support and resistance. In other words, not only do I believe there is a certain amount of distance beyond which exchange rates will typically resist separating themselves from the central tendencies of key price distributions. It seems to me I have also observed that there is generally a limit to the amount of time exchange rates will advance in one particular direction without deviation. I refer to these limitations as temporal support and resistance, and they have proven to be a welcome enhancement to my system. As of today, when putting this system into practice, I switch back and forth between daily, 240-, 60-, 15-, 5-, and 1-minute charts to get different perspectives, even though all of these time frames are basically configured with the same relative/corresponding measures. (This is no longer true. I now trade primarily using one-hour charts.) Also, I no longer rely on the 36-day baseline to gauge in which direction price is headed from month to month, because I don’t even care what is happening at that level. However, I do still check the 12-day baseline (with the outer limit of the corresponding price range set at 8% deviation). After that, instead of monitoring actionable price movement from a swing trading perspective by dropping down to the six-day baseline, I drop down to the four-day baseline. (This is what the less ambiguous, but slightly lagging, 12-day trend confirms. According to my old notes, most of the time the six-day price range falls within 2% deviation.) Before, I was generally looking to trade in the direction aligned with the slope of the 36-, 12-, 6-, 3-, and 2-day trend lines. Now however, my interest is strictly in intraday trading. This entails entering positions as the 8-, 4-, and/or 2-hour baselines reverse direction from moving AGAINST the longer-term moving averages to traversing WITH them—riding the ebb and flow of these shorter-term measures as they move in and out of sync with those having greater values. (I believe this to be more profitable than employing a buy-and-hold style of trading.) The established routine is to enter positions as candlestick formation reverses direction such that price crosses above or below the 90- and 120-minute baselines, as appropriate, possibly taking profit just under the 0.20% deviation level of the 90-minute price range. This is especially true if the reversal takes place immediately following the rejection of price at or near the 0.55% deviation level of the five-hour price range AND/OR immediately after the rejection of price at or near the 12-hour temporal support/resistance level (or occasionally the 24-hour temporal support/resistance level). Basically, it's simply a matter of entering positions following 90-minute-baseline-pullbacks. (I no longer even know what the above is talking about. I don’t trade that way anymore.) The most important thing here is to make sure I am trading in the direction of the eight-hour baseline (especially if it is confirmed by the 16-hour trend), given that the eight-hour trend is the measure that constitutes the most accurate and valid actionable representation of where price is ultimately headed at the intraday level. (I now confirm this with the 24-hour baseline—not the 16-hour trend. The eight-hour trend cannot be trusted on its own. It is not as valid as I previous thought it to be.) On the other hand, if you’re more interested in scalping, enter positions in the direction of the slope of the four- and eight-hour baselines as price is rejected at the 2½-hour temporal support or resistance level, as appropriate. (At the "granular" or "microscopic" level, you might even want to monitor 20- and 40-minute temporal support/resistance levels, given that they are good for pinpointing pullback entry levels in the intraday trend and for detecting early indications of reversals in the 90-minute and/or 2-hour bias/sentiment/price flow.) (Today, I would recommend monitoring the 17-, 23-, 27-, 30-, and 45-minute moving averages for this purpose, with the 40- to 50-minute range being the most critical.) With Numerical Price Prediction having been fully developed, I am now turning my attention to learning to program using MetaQuotes Language 4 so that I can fully automate the system, if possible.
Thursday, September 30, 2021 Well self, after having pretty much tried it all, let's just say that in the final analysis, you are NOT a set your trades and walk away kind of operator. To maintain the success rate you desire, your "motus operandi" must be to trade based on the 7-, 15-, and 30-minute trend lines, merely keeping measures of greater value in mind as a means of anticipating likely reversal zones. If you want to avoid draw downs almost entirely—and you do—then trading off the 8-, 16- and 24-hour baselines is not really practical, and even the 1-, 1½-, 2- and 3-hour baselines are of only secondary interest with respect to the decision-making process.
"To maintain the success rate you desire, your "motus operandi" must be to trade based on the 7-, 15-, and 30-minute trend lines." Some say, "Every trade begins as a scalp!"
So, here's the deal, as Joe Biden is so fond of saying... When it comes right down to it, you always want to be trading in the direction recommended by the 7- to 9-minute trend lines. That's about as precise as you can get and still be acting on actionable measures, practically speaking (keeping spreads in mind and given that the MT4 platform doesn't go any lower than one minute). However, it's best if you only trade the, let's say... 8-minute trend in the direction suggested by the slopes and positional relationships of the 8-, 13- and 17-minute baselines. Try to avoid getting caught trading against the combined counsel of this threefold cord, if possible. Beyond this, look to the 34-minute baseline and/or its associated moving average envelope(s) for the gist of the intraday price flow (i.e., for the intraday bias/sentiment). If it is neutral, you might opt to trade the above-mentioned "cord" in both directions buying and selling as they reverse direction. But, if the 34-minute baseline is clearly bearish, you are most likely to encounter consistent success if you limit yourself to short positions. If it is clearly bullish, you are most likely to encounter consistent success if you limit yourself to long positions. If it is not clear which is the case, move up to the 1-, 1½-, 2- and 3-hour baselines to see if price action is taking place above them or below them, and if they are obviously sloping in one direction or the other. This should give you an idea of where the rate is ultimately headed. However, if price action is taking place in the midst of these measures and/or they are, to one degree or another, a jumbled mess, you need to move on to the next asset. As for the 8-, 16- and 24-hour baselines, they don't really come into play other than to confirm when you are trading in the same direction as the longer-term and/or day-to-day trends. In fact, price moves against them so frequently at the intraday level that you could spend up to half the day passing on extremely lucrative trade opportunities waiting for price action to realign itself with these broader measures, so you should probably just keep them in mind so that you have some idea in which direction price might eventually be headed (if it happens to turn out the rate was not in the initial stages of a full-fledged reversal). This means you will spend most of your time monitoring five-minute charts, since they make it possible to track the 7- to 9-minute baselines all the way up to the day-to-day trend. You will not be able to view the longer-term baselines on one-minute charts, but you will want to use this lowest-available (MT4) timeframe for pinpointing exactly when you want to enter and exit positions. (And any chart higher than 15 minutes is definitely to obscure what is going on with the 7- to 9-minute trends, which is why 5 minutes is best.)
It wouldn't matter if the MetaTrader 4 platform DID go lower than one minute, because roughly 8½ minutes is about as low as you can go and still be tracking the general flow of rates from an actionable standpoint. Lower than this and you begin tracing paths that essentially amount to insignificant fluctuations lasting too short a period of time to generate any kind of bankable profit, so that at such levels, you would be attempting to trade "noise."
Though, me thinks I shall in all probability find 4½ minutes useful in terms of timing entries and exits within that general flow, most likely as represented by the 26-minute price range envelope.
That should have said "the 13-minute price range envelope," and NOT "the 26-minute price range envelope." This is keeping in mind that, in the immediate context, the general direction I want to be trading is conveyed by the trajectory of the 47-minute baseline. Beyond that, I'm looking at the slopes of the 90-minute, 4½-hour and 8-hour price range envelopes (for projections out in the more-distant future). Ideally, I want longer-term trades to be aligned with these last three measures whenever all three are on the same general course anglewise.
In translating my latest updated one-minute chart configuration to five-minute charts, I feel I see the overall intraday price flow being tracked by the slope of the 90-minute price range envelope (rather than 47 minutes), with the course of the eight-hour price range envelope suggesting where price is ultimately headed in the longer run. (The 4½-hour measure is less important.) This would seem to recommend entering positions as the 90-minute envelope reverses direction to realign itself with the course of the eight-hour channel. If the two measures are already aligned, then positions would be entered when the 26-minute (not 47-minute) trend reverses direction to join them. And if all three of these are already in sync, then it would be the reversal of the 4½-minute price range envelope that would trigger entering new positions (or exiting exhausted/depleted ones).