Thursday, July 20, 2023 I'm going to attempt to enter a USDJPY long position and remain in it for several weeks...a style of trading I've never attempted before, which is being prompted by my having signed up with a new "proprietary trading firm" that, from what I understand, just launched somewhere around May 31, 2023. My goal is to take an initial $10,000 worth of working capital to $11,000 as quickly, easily and safely as possible, thereby qualifying for a fully funded account. Toward this end, I am relying in part on weekly charts displaying the four-month, one-month and one week price flows. USDJPY has been looking at a bullish four-month price flow ever since just after mid 2021. However, monthly price flow turned bearish in a BIG way from about November 6, 2022 to around February 12, 2023, and it eventually started forcing the monthly support levels lower and lower. The resumption of an all-around bullish outlook accelerated beginning with the week of May 21, 2023, but then the pair watched its weekly trend turn south during the most recent two previous weeks. This week's price action is resulting in a green candlestick however, but my numbers have yet to suggest that the weekly trend is turning north. Moreover, price (140.48) has yet to drop down to my projected monthly support levels between 131.71 and 133.44. So then, I have executed this trade (with the strong possibly I have done so prematurely) based on two measures... First, my hourly charts indicate it is likely that the day-to-day price flow reversed from bearish to bullish on July 14, 2023. And second, it might very well be that the rate was rejected just a hair above the statistical support level represented by the four-month baseline. Should the US dollar-Japanese yen happen to follow though on these bullish maneuvers, my plan is to remain in the trade until the weekly price flow once again turns south, and note how much profit the trade was able to generate.
I want you to take a look at your daily charts to see if any of the pairs are exhibiting a clearly trending 12-day price flow. If so, be on the lookout for opportunities to test the feasibility of executing a tactical maneuver in which you enter positions as the day-to-day trend is coming out of a pullback to the "far" side of the four-day price range channel, but ONLY if the four-day and 12-day measures are both flowing in the same direction. (Use the "One-day Direction Is Easy to See" chart configuration.) EURGBP is close, but unfortunately, the four-day measures are neutral instead of bearish. So, the only pair that meets your conditions is GBPUSD. Accordingly, if price continues to fall another day or two and then bounces north, plan to enter a long position and remain in the trade for several days—until the day-to-day baseline turns south once again. (By the way, GBPUSD has made contact with the inner lower band of the two-day price range envelope, which is now almost neutral, just so you know.)
As you look over the charts that, after five years, you have chosen NOT to delete, it strikes you that the 13- to 15-hour price flow is indicative of where price is headed from day to day, with faster measures being subject to deceptive fluctuations and slower measures evidencing an unacceptable amount of lag. To test this observation, begin making minimum longer-term wagers based on this contention, which would recommend the following... AUDUSD has been headed south, but only for four days. (Not a very extended period of time). Look to sell it above 0.6795. EURGBP has been headed north, but only for six days. (Not a very extended period of time). Look to buy it below 0.8637. EURJPY has been headed north, but only for six days. (Not a very extended period of time). At 155.69, you can look to buy it as soon as the hourly trend turns north. GBPJPY is headed south, but it has not been at all consistent over the last 24 days. If you wish to live dangerously, you might look to sell it above 180.70. GBPUSD has only been headed south for three days, but it is doing so in dramatic fashion. Look to sell it above 1.2960. USDJPY has been headed north for four days, so look to buy it above below 139.37. (Actually, you are ALREADY in a long position based on a four-day pullback in the 12-day bullish price flow.)
The yen pairs made a massive move while I was sleeping. (Was this due to word that the Bank of Japan is likely to keep policy unchanged?) In any event, this led to a -$5.54 loss from my 0.02 lot GBPJPY short position as the bearish asset suddenly shot north, but a $93.18 gain from my 0.1 lot USDJPY long position, thanks in part to the favorable risk-to-reward ratio stemming from my profit target and stop loss levels. With this monster push north, I now have to classify GBPJPY as neutral from a daily perspective, at least for the time being, seeing as how it has essentially gone nowhere over the last ten days...
So then, rather than remain in the trade for several weeks, I pocketed my gains after just several hours, due to the massive move that I guess was triggered by rumor that the BOJ would not be altering policy. Perhaps I will buy the pair once again if it pulls back to support, or even if it doesn't pull back, but does evidence the presence of a massive amount of momentum insisting upon forcing it higher. At this point though, I'm likely to cut my position in half, to a mere 0.05 lots.
CONCLUSION So, in the five years since I established this thread, I have concluded that setting a 25-pip minimum profit requirement is total folly, at least when it comes to the Forex market, and with respect to a trader whose desire is to generate profits on a daily basis. In the final analysis, it is my opinion that you take what the market gives you. If that's 25 pips...great. If it's 100 pips or more, fantastic! And if it's a mere three pips, then so be it. Using a version of Numerical Price Prediction (NPP) that conforms with this way of thinking, I have returned to my old ways, managing an overall 93% "daily" success rate over the last two 24-hour market cycles... However, unlike the trading I was doing back in 2017 and throughout the years I fine tuned my system, I'm no longer limiting myself to a volume of 0.01. Typically, I will range between 0.02 to 0.05, sometimes bumping it up to 0.1 to 0.5, and on some rare occasions, even trading as much as a whole Lot (1.00). The commission charged by Scandinavian Capital is killing me, though. I'm used to trading with OANDA, which I understand offers two pricing models—spread-only, where their commission is wrapped into the (wider) spreads, and core pricing + commission, where the spreads are tighter. Apparently, I preferred the former, but unfortunately, Scandinavian Capital never gave me such an option.
MONDAY | MARCH 4, 2024 So at this date, how do you define NPP? Copyright © 2024 Fred Duckworth Numerical Price Prediction (NPP) is a unique and innovative trading system based on five biblical principles: Test everything and hold fast only to that which proves valid and reliable. Systems generally operate at peak performance when the interactions between their component parts evidence strong, healthy relationships. The best plans are usually established in the presence of a multitude of counselors. Rightly interpreting the signs of the times is an absolute necessity. Positive outcomes are typically the result of having made good choices. To my surprise, applying the principle of "testing everything and holding fast to that which is good" led me to reject many strategies wholeheartedly endorsed by any number of trading gurus, such as Elliott waves, Fibonacci ratios, harmonic patterns, pivot points and the like. In effect, I replaced the advice to "keep your eyes on the road" with a mandate to "focus on your destination," a subtle, yet profound, distinction. Obsessing on the former tends to be constraining—dictating one’s movements and limiting the parameters within which one is free to operate, often locking people into notions that are not truly worthy of the reverence bestowed upon them. But, emphasizing the latter allows folks to be creative and take any route desired, so long as it carries them toward that on which they have resolutely set their gaze. So, when strategies involving moving average convergence/divergence (MACD), stochastic oscillators, the relative strength index (RSI), the commodity channel index (CCI), the average directional movement index (ADX) and other indicators failed to live up to their reputations, I had no qualms about discarding them entirely and searching elsewhere for the "signs of the times" which, if interpreted correctly, would result in market forecasts of unusual accuracy. As it turned out, I found that the absolute best "atmospheric barometer" for predicting the direction in which an exchange rate might ultimately be headed was nothing more than a simple moving average, with a handful of key moving averages evidencing superior accuracy in this role. Nonetheless, there are any number of factors, or "data points" impacting foreign currency exchange rates, with the "Holy Grail" being the ability to unravel the hidden correlations between them. It’s a matter of crunching the numbers and doing so in the correct manner, plain and simple. And speaking of "correct manner," I think I should probably mention that, though one often hears traders stating "the trend is your friend," from my perspective, it would almost surely be more accurate to say that the trend is merely one of several friends. For it seems to me that what would have to be considered at least equally as important as trend is the location of rates within the entirety of a given asset's price distribution. So then, though investors often speak of trend lines, I've ceased to think of trends as being represented solely by lines, and have come to conceptualize them as belts as well, with the location of price within the expanse of values constituting the width of these oscillating bands being just as important (when deciding exactly where to enter and exit positions) as the general direction that each "breadth of values" is headed. Accordingly, my final decisions on when to buy and when to sell are always made based on the consensus of various input data, sampled in multiple time frames—data which includes baselines, market structure, temporal support/resistance, horizontal support/resistance, price ranges, and reoccurring chart patterns. It is the consensus opinion of all these various factors that determines what I will decide to do in the final analysis. The moves I make depend on what each of these determinants means in light of all the others and how they all will affect and impact on one another. It is the interpretation of each moving part individually—and of all these assorted components as a whole—that constitutes Numerical Price Prediction. So then, Numerical Price Prediction is all about interpreting what's happening in the moment based on market generated information, which is to say—technical analysis—and not on the non-market generated information referred to as fundamental analysis. And though price action might correctly be defined as "the movement of a financial asset's price over time, where traders analyze historical price data to identify patterns and trends that can help predict future price movements," Numerical Price Prediction aims instead to evaluate the movement of financial assets in time (as opposed to over time), in an effort to interpret current price movements (as opposed to predicting future price movements). It comes down to "ruling reason," which for me, is just another way of saying the numbers, or "the math" if you will—the summation of all those correlating data points that are a part of the market generated information. This is accomplished by relying on 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 is 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; it evaluates the synergy between such factors as typical price ranges, reoccurring chart patterns, horizontal support and resistance levels, trend lines, and market structure, all in multiple time frames—with the result being a graphical depiction of current conditions that traders can then use to help make precise, well-timed trades. Moreover, 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. Even so, to trade with the clarity and precision I desired required me to carry out an additional step in which I assigned a specific temporal value to each individual baseline and its corresponding or associated price-range envelope(s)—to answer the questions: 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? 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. But again, though the system was designed based on cyclical and replicable patterns, in real-life application, it is seeking to calculate the odds of price reaching designated values within a given time period based on temporally-based measures that essentially take "guess work" out of the picture, resulting in its more-or-less reflecting the principles of flight dynamics, which use the laws of physics to explain how forces act on vessels to govern their performance, stability and control to ultimately determine their velocity and attitude with respect to time. So, in the same way pilots know a Boeing 787 Dreamliner is lifting off the ground as it angles upward at two to three degrees per second with a maximum angle of 10 to 15 degrees, retail traders can know the parameters dictating whether an asset is rising or falling from the perspective of a day, swing, or position trader. And similar to an aviator's knowing whether he or she is gaining or losing ground by monitoring key levels, including standard and local barometric pressure; ground and mean sea levels; or signals from vertical speed indicators, glide slopes and the like, retail traders can know which parameters dictate whether a given asset is rising or falling within the domain of all possible values. This means that traders using NPP can buy and sell based on objective, proprietary criteria that leads to an edge over other traders who rely solely on more standard or traditional data.
I've expanded the application of Numerical Price Prediction (NPP) to trading commodities (crude oil, natural gas, gold and silver) via the North American Derivatives Exchange (NADEX), which for the moment, is making trading kind of fun. This entry I saw that was posted six years ago (see below) is just one more example of why I will probably always rely on technical analysis as opposed to fundamentals to dictate my final decisions. (Price is going to go where it's going to go, whether this is in sync with the logic/rationale of the fundamentals or not.)
FRIDAY | MAY 24, 2024 Satisfied with the outcomes stemming from the use of my (possibly culminating) chart setups and alert indicators for trading gold, silver, crude oil and natural gas—enabling me to generate returns of anywhere from $30 to over $100 from the purchase of just a single NADEX knock-out contract—I'm now returning my attention to foreign currency pairs on the chance that approaching them from a similar angle might enable me to obtain comparable outcomes/results trading Forex... The six-hour envelopes are great for getting a sense of where foreign currency pairs are headed from day to day, and especially for projecting the probable limits of the daily price range. However, this measure is still somewhat unstable, meaning that to get a more accurate picture of the day-to-day price flow, a slower indicator—the 12-day baseline—must be dropped on the charts. After looking over the resulting charts intently, if I'm seeing what I think I'm seeing, the 90-minute price flow constitutes the most stable intraday measure. So hypothetically, the most profitable day trading (pseudo-swing trading) strategy, it seems to me, would amount to entering positions when the 90-minute baseline reverses direction. I just need to figure out the details on how to carry this out with optimal precision, efficiency and consistency. A possible guideline I'm initially considering is to wait until the 90-minute baseline attains a slope of at least 0.0929 (or less than -0.0929) as represented by the associated lower-panel histogram. A second is that once this happens, I should make a point of waiting for a pullback behind the 34¼-minute baseline before entering a position. After taking a closer look at an example of this however, it appears that entries in this situation should only be made from behind the contrarian band of the 13-minute price range envelope at 0.03% deviation... The above alert was coded based on the ideas expressed in the previous paragraphs.