5/1/06 to 6/1/06 Outlook Notes and Observations
The Signal:
Current Outlook draw-down 290 pips and nowhere near my comfort level. Just for the fun of it, I will allow this 100 lot Outlook trade to run its full course, so two (3) more weeks left before I close the position – or sooner on BE or better.
For those familiar with TCDs, here are the current numbers as of EOD Friday, May 12, 2006:
Monthly SAC TCD Long = 733 pips
Monthly SAC TCD Short = 211 pips
Omega = 488 pips
Weekly SAC TCD Long = 379 pips
Weekly SAC TCD Short = 119 pips
Omega = 222 pips
Daily SAC TCD Long = 202 pips
Daily SAC TCD Short = 63
Omega = 112 pips
Aggregate SAC TCD Long = 438 pips
Aggregate SAC TCD Short = 131
Aggregate Omega = 274 pips
It should be abundantly clear where the Dominant TCD and Subordinate TCD reside.
My goodness – you’ve got every single TCD Long dimension bigger than its own Omega value. WOW! Only a couple times this week did the Day attempt to poke a hole to the Short side but only to be sucked back into the Monthly upside vacuum (nature abhors a vacuum!
) This is why waiting patiently for the Subordinate TCD to fill and then riding it back into the Dominant TCD, is one of the easiest ways to get your feet wet using TCDs as tools for trading.
All of those types of Day trades this week worked to perfection. They are the easiest to make using TCD’s and you don’t need an elaborate trading system wrapped around every decision you make. All you needed to make those trades was basic knowledge on what a TCD is and how to set-up its metadata to take advantage of it when the opportunity arises. With this very basic approach, you don’t get as many trades as a more advanced system, but the trades you get are almost a 99% guarantee of success to at least some kind of basic profit level that most traders can live with. This week, these simple trades turned out to be huge in every case – so I hope you caught some of those Stealth moves.
As far as the Outlook Trade Profile is concerned, the past month fully outlines in big bold letters why it is so important to use TCD data well
beyond the time-frame in which you trade. This extreme bull market slipped right under my radar even though I had the ability to detect it back in
December of 2005, if I had simply included additional TCD metadata that is not currently in the system. The key to seeing this 900+ pip move was locked inside the
Annual TCD.
Had I built
Semi-Annual and Annual TCD metadata (which I’ve thought about but never used in the past), there would have been enough extended (down range) Long TCD signal to use as input in the Swing and Outlook engines. That would have been enough to reverse the “predictive” Short input in both medium-range signals over the past two (6-8) weeks.
As a quick refresher. Each signal in this system has three (3) input types:
Long
Short
Mixed
Each input type has an associated or linked Probability Measure in numeric (%) form, such as 78.12%. Each Profile will
always have both
Long and Short signal inputs vying for the right to be displayed on the Dashboard. This is
necessary for a decision support “predictive model” trading system. So, when you see one big red arrow signaled in the Dashboard indicating that the trade profile is “Short” for that trade, keep in mind that at the Engine level, there are also Long inputs as well. In fact, there could be 59 Long inputs and 60 Short inputs and depending on how the system is weighing both sides of the equation at the time, that could result in a Long signal, or it could resolve to a Short signal. The system has the job of reconciling which trajectory should be the “tradable” trajectory for that session - whether the session is a Daily, Weekly, or Monthly session/trade/bar.
What makes the signal appear on the Dashboard as either Short or Long is not a simple process. It is a fairly complex calculation of a probability statement that balances both Long AND Short inputs into the signal cluster that generates a “single signal” (big arrow) displayed on the Dashboard. A fairly complex process that needs to be balanced well at all times. So, there could be a big red arrow indicating a Short trade on the Dashboard, while underneath at the Engine level there could be more Long input than Short input for that same signal, where the system has decided to give more
weight to the Short input and thus counter or reverse the underlying Long input that would have otherwise been allowed to appear in the Dashboard.
This is part of the Metadata Engine as this is a Predictive Model Trading system for all trade profile types. Its job is to properly balance Projections with current Market Momentum.
The Problem & The Solution:
I typically don’t lose money when I trade – period and have become accustomed to that level of success over the years. I also typically do not trade Swings or Outlooks as I found it easier (at first) to code the system to map and navigate the hyper-short term 24 hour Trajectories. The system does an outstanding job of managing the hyper-short term 24 hour trade and has been doing that well in excess of 90% accuracy for several years now. However, the Swing and Outlook trades were always used as input that shaped the underlying Day trades. Up until now, Swing and Outlook signals were used to hone in the Day and create low risk Day Trade profiles. The problem with Swing and Outlook trades is that I have never used bigger bars of data to shape and form the Swing and Outlook trades the exact same way that they shape and form the Day trades.
The solution came when I noticed the very low degree of Weekly Short TCD magnitude and Monthly Short TCD magnitude (the routine tendency for the previous low to be revisited on a weekly or monthly basis). I began looking at the
Annual TCD data and
BINGO there it was! An
Annual SAC Short TCD from 2005 having filled in excess of 100% and terminating its trajectory at
$1.1640! When I looked at the Annual SAC Short TCD terminated at $1.1640, I scratched my head and wondered where I had seen that number pop up before.
This was the EXACT (I’m getting really excited now) same Floor that I called way back in the final quarter of 2005 on DailyFX as the current price was in the $1.1780 range when this system was projecting a
Monthly Outlook Ceiling of $1.2305. Back then, the price moved from the 1780 level, sank down to the Floor of
1640 and then rocketed to 2325 on queue. The Monthly Engine was able to see the 1640 Floor with a 2305 Ceiling back in late 2005, but there was no Annual Engine in the system. Both would have seen 1640 as the Floor, the Swing would have seen 2305 as its Ceiling and the Annual would have seen 3700 as its Ceiling – all back in December of 2005 (according to the data)!
Here’s the key: The system’s view beyond the Monthly (Outlook Trade profile) data was limited to its own event horizon which cannot see the full year! Had I been using
Annual SAC TCD data, the
$1.3700 “Annual Ceiling” would have been clearly in play from the
shared Floor of $1.1640 back in 2005 – a picture perfect
Annual TCD Long having its initiation directly in-ling with the late 2005 Outlook Trade profile targeting a 2305 “Outlook” Ceiling.
So, this “big move”, according to the new Annual TCD data that I’ve looked at was supposed to happen this year.
It never dawned on my to actually implement super-extended long range TCD data like
Annual Bars into a hyper-short term predictive model
Day trading system like this one, but BOY O’ BOY it really does make perfectly good sense. You might not see how much sense it makes for six (6) months during the course of a year
PRIOR to the Annual TCD initiating, but at some point
BOOOOOOM that Annual TCD kicks in and ZOOOOOOM the price goes ballistic
just….like….now leaving a lot of people scratching their heads wondering why.
I just love this business – you learn something new every day/week/month and year if you pay attention. Just the same way that I allow the larger signals to periodically override the Day Trade signal, I can also code the engine to allow the larger Annual TCD data to override the smaller Swing and Outlook signals. The hard part will be in finding the correct balance and the correct weighting so that the timing on the overrides coincides with the start of all new Annual TCDs. This should be far more than enough to greatly improve the Swing and Outlook performance.
The Market:
Who cares – I don’t!
At this point, I don’t care what the market does anymore – in the future, it won’t matter. This run up, at first, really had me scratching my head there for about 4-6 weeks as I was looking for answers as to why the Weekly LocBind and Monthly LocBind variables were not
unlocking/resetting and reversing to the downside much more strongly then they are right now. It is OK if the price continued to go
UP in the aggregate for the past two (2) months, but I could not understand why there was no Short side LocBind that was tradable on the Swing side of the equation during the bull run which is the absolute norm for most of the data that I’ve looked at.
Albert Einstein said: “You cannot solve a problem at the same level that it was created.”
I’ve always tried to use this as protocol for building this system. The answer was sitting right under my nose and I blew it off like it did not matter. I thought the Annual TCD data was simply
too extreme – too far away to impact the smaller TCD LocBind variables in the tiny sub 24 hour windows in which I make a living each day. I was wrong. Once that Annual TCD kicks in for the year –
look out! It does have the ability to stretch the smaller time-intervals such that the Subordinate TCD gets so weak that it makes the risk/ratio too large to allow entries to the Subordinate TCD side on a Daily, Swing and even Outlook (Monthly) basis! That is the power of an Annual SAC TCD that is in its early stages of initiation like this EURUSD Annual SAC Long TCD. The beauty here is that the same exact TCD principle that applies to the Daily bar ALSO applies to the MUCH BIGGER Annual bar.
It is a bizarre paradox – having the larger TCD lead the smaller TCD as on the surface you might think that the smaller is needed to give shape and form to the larger. However, the Twin Paradox Theory is likewise “bizarre”, but most likely true. This is not the so-called “Market Trend”. Go look at the EURUSD back on December 27th, 2004. The so-called market “trend” back then was Super Long and the high price that day was $1.3667. The bulls were out and running just like they are right now. Warren Buffet was raking in the cash hand over fist at this time too shorting the USD.
What happened next? Warren Buffet and many others Shorting the USD got hit with an
expired Annual TCD well in excess of 100% Fill. I’ve always wondered what happened to Warren – how could he lose over
$1 billion by continuing to short the USD – the Man is a genius at what he does, but something happened in 2005 that he could not foresee coming.
I never paid much attention at all to the Annual TCD data, but that data by December 27th, 2004, put the writing on the wall for the next move Long. In 2005, $1.1640 almost 12 months and 2,027 pips after the 2004 top came into focus as the US dollar went into what the market called an
way over valued condition. Warren lost more than a Billion during this Annual TCD SAC Short phase. Economists and Politicians alike were claiming that the US dollar was
too hot and people were saying the EURUSD would fall down to below $1.1050! This is the problem with “Trend Think”. You cannot see beyond the horizon. The TCD allows you to see slightly over the horizon. Having the Annual SAC TCD metadata would have made all the difference in the world for all of this years Outlook profiles and most of this years Swing profiles with two bad Swing weeks this year but each of them fully recovering to the upside the very next week. Simply, beautiful.
After examining the Annual TCD data for several years and from 2004 to 2005 to 20006, I have no complaints whatsoever about the “news”. In light of the Annual TCD data, I really have zero complaints. I just wish I had built the Annual Meta Engine when I finished the Monthly Meta Engine over one year ago. The Daily and Weekly Meta Engines were completed many years ago. The more Engines, the stronger the system will become.
The market is going ballistic to the upside right now simply because it
had to in order for it to retain its historical TCD patterns on the Annual level. Since I don’t typically trade the bigger bars, I paid no attention to the connection. But, the connection is unavoidably clear and makes absolute perfect sense after future analysis.
The System:
Though the system was not designed as a long range bomber, I now know exactly what I need to implement in order to make it a super long range bomber! I will be implementing the Annual TCD metadata into the system as soon as I can. I’m not sure how long it will take to fully integrate that new data and the algorithms necessary to override the shorter term predictive inputs in the Swing and Outlook profiles, but once completed it should prove to be a rather effective Swing and Outlook Decision support trading system. I also suspect that Swing and Outlook overrides that come a direct result of the new Annual inputs will extend up-range into the Daily Trade profiles signals as well making them much more effective than ever before.
System Trade Accuracy is measured over 280 consecutive trading days using ONLY Day Trade signals. I’m not a long range trader and never have been. But, I did want to see what the longer range signals looked like during a period of time when I was not day trading the markets each session. So, the accuracy of the system has moved back up to 93.25% for the Day Trade profiles give the perfect score of 100% accuracy for all of this week’s Day Trades. That’s a good sign as it tells me that regardless of the type of market conditions surrounding the system, it does a good job in getting the Day Trades set-up correctly. So, I can spend my time focusing on the Annual TCD data integration to bring the Swing and Outlook Signals up to the same performance level of the Day Trade profiles.
Sometimes it takes a really big error to move to the “next” level of trading. Not including the Annual TCD data into the system a long time ago was a huge error that could not be seen fully until the Annual Long TCD from 2005 extending into 2006, had a change to spool-up. This is a predictive model. Therefore, some things cannot be
seen and/or corrected until way down the road after larger time-frame data can be analyzed. So, I had to wait approximately 6 months for this wake-up call as the 2005 Annual TCD Short expired and the 2005/2006 Annual TCD Long spooled-up and launched.
I won’t get caught by that missile twice! Next year in 2007, I will know exactly where to be in order to catch that year’s “Annual” extreme run, whether it is Bull or Bear – I will know where the high probability super long range trade is most likely to kick-in.
Current Trade Related Projects:
The multiple Day Trade project has been revised, modified and honed down to 3 trades per 24 hour period. As a consequence, the targeting package has improved and I’ve gained a deep understanding of three (3) primary Trajectories that exist in all EURUSD day trades. I will continue to implement the new Day Trade profiles into system as I move along. Next week I will be trading and tweaking (where necessary) these three (3) key daily trajectories and getting more comfortable with them at the same time. Once I get them were I want them, I will then integrate their visual aid into the Dashboard.
I’ll be back for next Friday’s Outlook Trade profile report and I’ll try to get to some of your questions between now and Monday. Time to head out for the golf course – have a great weekend – it has been a very eye opening and productive week!
