EURUSD Commented Chart - 14th Dec 09

Here is a EURUSD commented chart to complement the weekly report.

MTFS update from last post

A little more than an hour and 40 pips later ... (cf post below)

The MTFS tells us not to rush on the next short

Here is an example of chart reading where MTFS is safe-guarding us from shorting too early.

Snapshot on EURUSD 233T chart

Here is another snapshot on a fast tick chart. We here see the power of MM and Fib levels, i.e. nothing specific to this technique, except maybe that the toolset tries its best to detect Fib patterns when noise level is reasonable.
The trading environment is not the easiest at the moment, with dynamics being swamped in volatility and noise. In such a case, it is in my opinion interesting to trade using breakouts on key levels. Assuming we are flat, it would be for instance interesting here to place a stop order below 4892, when the level has been tested place another one above (symmetrically or not) on a "one cancels other" basis. That will be my advice here.
Grabbing 10 or 20 pips shouldn't be too hard, and the fog will clear up to give us a nice Fib pattern again soon.

Off-topic but interesting primer nonetheless

High-frequency trading from Marketplace on Vimeo.

ES Commented Chart

On "popular demand" :D here is a commented chart on the ES continuous contract. We will see that we keep on following our old adage "go with the flow" while being careful as always in a resistance area.

HA Trigger Point

HA_Trigger is a simple yet interesting addition to the toolset. It calculates potential breakout point in determining the level that would have been required to toggle an uncertain "yellow" bar into a bullish blue or bearish red bar.
Generally quite effective when used in conjunction with MTFS.
At this very time of writing, the above snapshot is proving to be correct with a quick 5 pips short (target on key MM level)... Problably more pips to come, but that's another story.

TF Commented Chart

It's been a fairly long time since i did last post a commented chart.
I invite all users to compare it with their own "market reading" and let's review this market outlook next week.

DLL update June 1st 2009 ( minor fix )

A silly minor mistake in detrending data could lead to some occasional error in cycle detection. Error would only be visible in Entropy calculations. MTFS and pivot calculations do not use that part of the code.

It has now been fixed in DLL version 1.25, available on request.

SPY Swings & Cycles

We here show some market outlook on SPY using swings and cycles only.

MTFS : a fuzzy approach

As far as MTFS is concerned, it is possible to implement some Fuzzy Behaviour Analysis on our indicator.

For simplicity, we will limit our analysis to the fast white line (WL) and the slow green line (GL).

We can now therefore implement a Fuzzy Logic Controller (such as our sFLC3) onto both MTFS lines in a very classical way as this exercise is somewhat akin to the typical thermostat already described on the ForeTrade web site (see reference below). We do indeed feed each FLC with level and gradient information, to extract a line behaviour as an output.

Note however that we will derive the fuzzy system into 8 variations according to 2 extra pieces of information, namely, according to whether lines have crossed and how (no or outdated crossover, early crossover, spot-on, and late crossover) and whether the WL has peaked or not (crisp boolean). The rule sets will obviously be incompletely defined as some fuzzy states are impossible or of no interest.

We shall also pay attention to state saturation when interconnecting the 2 FLCs.

Next step will be to link the MTFS behaviour to Entropy and Support/Resistance information.


Reference: http://www.seattlerobotics.org/encoder/mar98/fuz/flindex.html

A picture is worth a 1000 words

Complement to the Weekly Report 040509

Chart Reading (Part 1)

I

Our trading method implies capturing snapshots at our charts in the following way:

We see 2 rectangles, one is 128 bars wide and the other is 64 bars wide.

The wide rectangle could actually be even wider if we use a multiplier to detect pivots over 256 or 378 bars. Besides pivots which are recalculated dynamically to eliminate irrelevant minor movements, the other 2 indicators (MM support/resistance and HA bars) are static i.e. are not back-adjusted.

One could add other indicators but it is recommended to stick to "PPP Helpers" i.e. indicators which can help draw Pure Price Patterns (PPP) adding as little lag as possible.

One could trade "Direction" using that box only. This used to be called the "Scalp & Surf" technique whereby one tries to get quickly into the new move and then stay in either til the next pivot or according to other rules (S/R level, money management etc). The "Scalp & Surf" technique is generally applied to fast tick charts although all charts look the same) and has primarily the merit of being very simple.

Entries are given by swing direction and HA bar colour, without using Magnitude or context. Our HA paint bar is a custom version which include some candlesticks-type rules.

II

Let's now take a closer look at the information provided in that box.

1) Swings or pivots are numbered, the last one being Number 7 here. Again, pivots re drawn dynamically. Pivot 7 is still unconfirmed, but assuming it is confirmed after a (limited) retracement, it could still be erased if a Pivot 8 then pops up followed by a strong rally. Pivots 7 and 8 would be simply erased from the chart. One can for instance imagine that this actually happened between the now pivots 4 and 5 (red bar retracement).

2 ) Pivots do "crystallise" over time. In other words, a pivot becomes stronger and stronger during its life inside the 128-bar window.

Having said that, its representation or significance on the contrary diminishes when
it gets older, to finally disappear after 128 bars.

Obviously, a trending market will provide fewer pivots which may take longer to strengthen. A congested market will provide more pivot points which will generally be more stable, but which have less significance individually. They however tend to reinforce one another like on the snapshot above (S/R area).

3) The algorithm is highly non linear and certainly does a good job at detecting all salient pivots. There are however cases where "Swing Quality" is just too low to validate any scenario (SQ=62 on this snapshot is quite adequate), or despite all its good efforts will just fail to capture a sudden move (market spike, or high freq dynamics outside the algorithm spectrum). The search technique is nonetheless VERY biased towards providing the most exact picture on or near current bar, and will ALWAYS adjust within a bar or two, so still faster than most if not all standard indicators.

III

The long rectangle shows additional smoothed indicators, here MTFS and Entropy.
Both provide information from another angle about the underlying energy in the market. One could of course imagine other supporting indicators to add information to the "PPP" picture. Those indicators have already been described in previous reports, so in a few words one also tries to detect specific patterns in MTFS (extreme zones, line gradients, line crossovers etc) and peaks/troughs of Entropy particularly when EntBin is also extreme (-5 or +5) which almost certainly validate reversal points.

IV

We've seen how we try and determine direction at a given time frame. We also capture some indication of magnitude through pattern interpretation. This level of magnitude may be sufficient for a "Scalp & Surf" trading technique, and does provide enough information to optimize money management (tightening stops, moving limits).
Next is to combine 2 or 3 time frames for a more comprehensive visualization of magnitude through context. Context provides the environment for instance to only enter in one direction, or better segregate types of trades according to market configurations.

Market update - Apr 17th '09

The current configuration is another evidence that one should not enter a trade too early (unless one just takes swings in shorter time frames).

The 60mins chart is now on its strong resistance level, and it would maybe have been wise to be patient and not jump into reversing short too early. ES is still quite resilient anyway, particularly on daily and weekly charts, so only agressive traders will have a go at a short now even if a retracement is imminent.

We will however notice that the 60mins MTFS does not indicate a clear reversal yet, and the daily onehas not peaked yet even if seriously overbought. Shall we therefore see 875 being hit first ? That's a scenario that has been mentioned already in previous reports.

Note on tick charts (8 AM UK) a short is under way.

ER (TF): exact same configuration.
ER should technically retrace on stall level (468), but we'll cautiously wait for a red bar first.

( posted 8:05 AM UK )

ES Chart with commentaries - Apr 16th '09

This is a commented ES chart to complement the short market report on our other blog:
http://marketsnapshot.blogspot.com/2009/04/market-update-apr-16th-09.html

More than just visuals...

I realize that i often forget to mention the usefulness of the output window to read chart information in plain text format. I also wish to remind users that the EasyLanguage code is UNPROTECTED, hence while the pivot algorithm is rather complex, there is a lot that can be done to interpret information in any way users want.
All pivot information can also be retrieved via simple API calls such as RetrievePivotInfo and can be used in external programs using the DLL shared memory (similar to Global Variables).

Enjoy your weekend,
bv

Tracking a pivot point

Our pivot detection algorithm sometimes seems a little confusing to traders who are new to the toolset. We're going to here look at a situation seen today on EURUSD.
First snapshot shows a potential pivot, then we see how it finally materializes into a retracement trade (screenshot uploaded from latest (top) to initial setup (bottom).

Follow-up on €/$ 233Tcommented chart (March 5th 09)

Blogging is not the right vehicle to report fast trading action. However, in order to follow up with the previous post below. Here is another snapshot to better understand the current trading environment (7:30 AM UK).

That's it for today though... :)

New EURUSD 233T commented chart (March 5th 09)

Let's examine this situation where we entered short on last retracement move, but we don't know what target to set.
In this example, we have a relatively easy short term target, just below previous lows, and stops have already be moved to 1.2635 (MM Resistance) to secure some profit).
However it is not clear at this stage whether the € will fall lower.
So either take profits or tighten stops further, and enjoy the ride...

ES Chart with commentaries - Feb 21st '09

Here is a commented chart on ES. Traders leaning on the lower time frames will have jumped long, probably for a quick profit only. Longer term players are probably still short or have reduced positions on support level.

A simpler use of the toolset on fast tick charts.

When trading is fast (EURUSD 34Ticks here), one needs to rely on fewer simpler indicators. Secondly, we want to avoid any sort of lag, so we here want to only depend on pure price patterns. This is why this chart only uses the Swing indicator (which provides Fib information), our custom version of HA PaintBars, as well as MM lines.
Chart reading is straightforward, simple, efficient.

ES Chart with commentaries - Jan 9th '09

Here is a commented ES chart to better understand our chart reading technique.

EURUSD Chart with commentaries (2)

EURUSD Jan 7th '09: mid-day chart reading

(Posted 12:15PM UK)

Quick review of ESH09 commented chart below.

It was probably not the best idea to publish a commented chart on Jan 1st simply because not only markets had been closed for about 36 hours, but there are also portfolio adjustments on the new year and volumes are still relatively low.
The result hence is that the ~910 target was hit way too quickly.

We have noticed in the past few months that volatility works as a "time compressor". For those who wish to keep the trading frequency and style relatively unchanged, time frames should be multiplied by 2 or 3. I however recommend to adapt within reason and go with the flow. Trading is faster but the reading technique remains largely the same.

Another volume chart with commentary.

Here is another market reading experiment using our trading technique. We anticipate a support to be found soon (from current level to high 880s) with a following bounce to maybe ~910. Let's check it out later today... with due consideration that volumes could still be quite low today.

(posted 3:20AM Eastern)