Predicting future FX support and resistance levels using mathematics

[gka]

Last night I attached the support and resistance levels of GBPUSD of the Volatility Response Model (VRM) for today. Here are the results. Weekly levels in the top 30 minute chart, daily levels in the bottom 30 minute chart. Times are GMT-4 . EMA channel (4,7) included.

Weekly level 1.3397 was the day's high before falling to daily level 1.3358. There were some large gaps between levels.

Taking a break over Christmas. Happy Christmas to everyone.

 

[Pat494]

Here are 2 VWMA indicators.

 

[NVP]

So what is the performance of this indicator on recent days ?

N

 

[gerryg]

How can I use it for trading on my MT4 platform?

 

[gka]

EURUSD also predicted using VRM algorithm

Here are 2 VWMA indicators.

At the end of the describing documents I already attached at the beginning of this thread you will find links to VRM predictions for

EURGBP, EURUSD, EURJPY, EURCHF, EURCAD
GBPUSD, GBPJPY, GBPCAD
USDCAD, USDCHF, USDJPY, USDNZD
AUDUSD

including your interest of EURUSD

 

[gka]

So what is the performance of this indicator on recent days ?

N

I think you can make an assessment of the VRM with the end of day results I have posted on this thread for GBPUSD. I look for large gaps in the VRM levels to start and stop trades.

 

[gka]

How can I use it for trading on my MT4 platform?

I am using the CMC markets trading platform and so I don't have experience of MT4. This is what I do on the CMC markets platform.

I plot the VRM levels on two GBPUSD charts. Weekly VRM levels on one chart stay the same until Friday 5 pm New York time. Daily VRM levels on the other chart get updated daily after the 5 pm New York close. At the moment I am using 30 minute candlesticks. Then I add an Exponential Moving Average (EMA) channel to each chart with periods 4 and 7. I use the EMA to assess whether the price action is bouncing off a VRM level or not.

I use the VRM levels of the three FX pairs GBPUSD , EURGBP and EURUSD because you can see which FX pair is leading the bunch by the way they bounce off the VRM levels. Then I look for large gaps between VRM levels and that is where I like to trade. At the moment I have a S/L of 25 bps and a T/P of 50 bps.

I attach the 6 charts for GBPUSD, EURGBP and EURUSD I used during Monday 18 December. Top charts are weekly VRM levels. Bottom charts are daily VRM levels.

See my first post December 17th of this thread and you will see the GBPUSD levels in the GBPUSD charts attached.

You can see how GBPUSD and EURUSD reach a weekly VRM level in the top charts at the same time. Because of arbitrage GBPUSD X EURGBP = EURUSD I think you have to watch all 3 FX pairs to understand what GBPUSD is doing. Sometimes GBPUSD leads and sometimes it follows and sometimes it is just a spectator.

At the end of the describing documents I already attached at the beginning of this thread you will find links to VRM predictions for

EURGBP, EURUSD, EURJPY, EURCHF, EURCAD
GBPUSD, GBPJPY, GBPCAD
USDCAD, USDCHF, USDJPY, USDNZD
AUDUSD

 

[gka]

GBPUSD support/resistance levels until 5pm New York 27th Dec

I attach the VRM predictions for GBPUSD for tonight and tomorrow finishing 5 pm 27th December in New York.

A description of the algorithm and format of the attached chart can be found in the first post of this thread.

For anybody interested in predictions for other FX pairs just follow the link at the end of these two documents.

 

[Brumby]

I use the VRM levels of the three FX pairs GBPUSD , EURGBP and EURUSD because you can see which FX pair is leading the bunch by the way they bounce off the VRM levels. Then I look for large gaps between VRM levels and that is where I like to trade. At the moment I have a S/L of 25 bps and a T/P of 50 bps.

So what are the trade statistics outcome to-date in trading your model usimg CMC?

 

[gka]

So what are the trade statistics outcome to-date in trading your model usimg CMC?

I have spent a lot of time experimenting with the Volatility Response Model (VRM) using different timescales and EMA channels. At short timescales like 1 minute candlesticks there are more reversals that turn out to be retracements at larger timescales. At long timescales like 4 hours the news can have a big impact while you wait for the time period to end. The mid value (between bid and ask) 30 minute candlestick charts with a EMA (4,7) channel seem the best for me. I have not been using this timescale and EMA channel for long so do not have reliable statistics. I have had a run of 11 successful trades in a row. I am very interested in traders' experiences using the VRM predicted support and resistance levels and how they use the levels.

 

[gka]

VRM GBPUSD results

Last night I attached the predicted support and resistance levels of GBPUSD of the Volatility Response Model (VRM) for today. Here are the results. Weekly levels in the top 30 minute chart, daily levels in the bottom 30 minute chart. Times are GMT-4 . EMA channel (4,7) included.

Daily level 1.3372 was the day's low before rising to daily level 1.3432. There were some large gaps between levels.

Predictions for tonight and tomorrow to follow shortly.

 

[gka]

GBPUSD predictions ending 5pm 28th Dec in New York

I attach the VRM predictions for GBPUSD for tonight and tomorrow finishing 5 pm 28th December in New York.

A description of the algorithm and format of the attached chart can be found in the first post of this thread.

For anybody interested in predictions for other FX pairs just follow the link at the end of these two documents.

 

[Brumby]

I have reviewed your white paper but unfortunately they are absent of key contents that would be helpful to understand your VRM model and how to trade those levels.

I will go through each of the issues :

1)Your paper does not explain the algo logic from which the 24 levels are generated other than it is based on current historic data. The problem is that without understanding the logic, the 24 projected levels become meaningful to the extend that it is some mathematical calculation but nothing more.

2)There are no empirical data in support of which of these 24 levels are important in terms of statistical relevance. As such, it becomes rather meaningless because of expansive quantity absent quality. In contrast, trading Gann 1/8 levels, fibo retracement and expansion or simply pivot levels would offer a simpler trading approach.

3)IMHO, conceptually your trading model may be built on some circular reasoning whereby your premise is actually assumed rather than proven. My assessment is based on what you stated in your white paper "In summary, financial markets do not move randomly, but move about the levels determined by the VRM." The key question I would ask you is what causal relationship have you empirical established that allows you to surmise that financial markets moved about the levels determined by the VRM? It seems to me your statement is a presupposition rather than a fact.

 

[Pat494]

I am of the opinion that current maths is unable to predict the future movements of a stock with much precision. If it could there would be a lot of rich mathematicians.
I even wrote to a prominent mathematician who has ben on the telly often but never received a reply. And why ?
The problem is too complex.

 

[gka]

I have reviewed your white paper but unfortunately they are absent of key contents that would be helpful to understand your VRM model and how to trade those levels.

I will go through each of the issues :

1)Your paper does not explain the algo logic from which the 24 levels are generated other than it is based on current historic data. The problem is that without understanding the logic, the 24 projected levels become meaningful to the extend that it is some mathematical calculation but nothing more.

2)There are no empirical data in support of which of these 24 levels are important in terms of statistical relevance. As such, it becomes rather meaningless because of expansive quantity absent quality. In contrast, trading Gann 1/8 levels, fibo retracement and expansion or simply pivot levels would offer a simpler trading approach.

3)IMHO, conceptually your trading model may be built on some circular reasoning whereby your premise is actually assumed rather than proven. My assessment is based on what you stated in your white paper "In summary, financial markets do not move randomly, but move about the levels determined by the VRM." The key question I would ask you is what causal relationship have you empirical established that allows you to surmise that financial markets moved about the levels determined by the VRM? It seems to me your statement is a presupposition rather than a fact.

====================================================================

Thank you for your three points which I reply to below

1.) The algo logic starts by treating time as the tick of a clock rather than a real variable. After all you can never reach the point in space given by velocity multiplied by time when time = PI hours (3.1415926...). The algo therefore uses as input data, daily high, low and close values. The algo uses highly non-linear maths to relate sequential daily data and needs at lot of historic data to find the function. When the function has been found then the future is just one step away. Just input today's high, low and close and out drops three levels for tomorrow. That is just the start. Now I can combine daily data and get high, low and close every two days. And repeat the process and get another three levels over the two day time scale. And repeat up to the 8 day time scale using high, low and close over 8 days. So that gives 24 levels altogether. Each triplet of high, low and close (Hn,Sn,Ln) you see presented each night relates to a timescale used for the calculation. The whole process is repeated every night using the daily high, low and close that came in. The whole process is repeated every weekend using weekly high, low and close data. This is where the lack of data posses a challenge. There is not that much weekly data available so the algo exploits the fractal nature of financial markets to overcome this restriction.

2.) The Sn levels presented each night and each week are sentiment levels at the nth time scale. Until the market breaks through the top most Sn then the market is still bearish. Similarly until the market breaks through the bottom of the Sn levels the market is still bullish at some time scale. So the highest and lowest Sn are important. I also believe that S1 is significant from experience. The Hn and Ln are the extremes of price movement that are predicted by the algo for each time scale. That is why I call the algo the Volatility Response Model. News comes in and the market becomes volatile. Quite often some levels are duplicated or close together within 2 pips so you can discard at least one of them. Usually there are less than 24 levels when you discard. To reduce the number of levels on your chart you could try adding the first 5 above and below the price action and add further levels as needed if the market becomes volatile.

3.) The algo is highly non-linear maths that finds a relationship between succesive hstoric high, low, close data. Once found it is set in stone. When the next future high, low, close data is added to the data set the algo absorbs it and predicts the next future time interval. The causal relationship established by the algo is that a mathematical relationship can be found between sequential high,low, close data. And this relationship remains the same between today's end of day results and tomorrow's results still to be determined. The predicted levels of the algo are the structure about which the price action will move tomorrow. Each night I present GBPUSD predictions and at the end of the market in New York I present the price action about the algo levels. The proof of the pudding is in the eating as the saying goes. Interestingly quite often algo levels today will be also levels tomorrow. That is a level found today at one time scale will become the same level tomorrow at another timescale.

 

[Pat494]

I wonder if it possible to simulate quantum computing without all the high tech stuff ? So with programming maybe the average desktop could do this. Regretably I haven't the nuts and bolts skill.
However there may be different alternatives to the present binary system which would allow it. Consider trinary.
That is instead of 1s and 0s, you have +1s, zeroes and -1s.

 

[gka]

I am of the opinion that current maths is unable to predict the future movements of a stock with much precision. If it could there would be a lot of rich mathematicians.
I even wrote to a prominent mathematician who has ben on the telly often but never received a reply. And why ?
The problem is too complex.

========================================================================
I agree that the future price action cannot be predicted all the time. But most of the time the market price action is trending. Overall sentiment that an economy is declining will cause the markets to ditch a currency. The VRM calculates long and short term trend channels to asses this type of trend. Intra-day markets still trend. I believe that these trends are between VRM levels I post each night. Then there is reaction to news such as interest rate changes or CPI. Then the market becomes very volatile and can move hundreds of pips. My experience to date has been that these large moves are between VRM levels. Because of limited market data the VRM can only calculate only 24 levels. When news is dramatic then the market price action can move to the very edge of the trend channels. The trend channels give you an idea of what can happen if news is extreme.

 

[gka]

GBPUSD results for today 28th Dec

Last night I attached the predicted support and resistance levels of GBPUSD of the Volatility Response Model (VRM) for today. Here are the results. Weekly levels in the top 30 minute chart, daily levels in the bottom 30 minute chart. Times are GMT-4 . EMA channel (4,7) included.

Daily level 1.3395 was the day's low before rising to daily levels 1.3453/1.3455. After that there was a bounce off level 1.3432. There were some large gaps between levels.

Predictions for tonight and tomorrow to follow.

 

[gka]

GBPUSD predictions to 5 pm December 29th New York time

I attach the VRM predictions for GBPUSD for tonight and tomorrow finishing 5 pm 29th December in New York.

A description of the algorithm and format of the attached chart can be found in the first post of this thread.

For anybody interested in predictions for other FX pairs just follow the link at the end of these two documents.

 

[Brumby]

The proof of the pudding is in the eating as the saying goes.

In an earlier post I asked about your trade results to-date for obvious resasons because you understand the model more than anyone else. If you can't generate a positive expetancy over many runs then it is unlikley anyone else could.

Intuitively there are too many levels to trade from. I would be interested in your trade process to make it work. The problem is that a 24 hour window in FX is actually comprised of three sessions : Asia; European; and US. The volatility and price movements of each of the currency pairs are different during each of the sessions. I am unclear on how do you filter and then integrate that difference into your trade plan for each of the currency pair.