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Trading Insights

Ninjatrader Indicators - finding entries to trade

Trading Insights
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One question we get asked a lot - especially from our NinjaTrader indicators customers - is "how do we enter the market?" In 2013, we started developing a series of entry indicators that allowed people to have a sense of when the market was about to press higher or lower, leveraging Price Action - but always in the context of our leading time indicators. If you saw one of the Flux NinjaTrader indicators telling us to watch for a move up or down at a certain time, you could reference one of the Trigger Pack indicators to confirm that the move was actually occurring. Take for example this combination of indicators...the EMA Slope Color, the Hair Trigger, and the Volume Vacuum:


Flux Ninjatrader indicators


With this setup and template, the chart shows Hair Trigger entries - to be taken with the direction of the trend. The Volume Vacuum confirms the entry, by indicating an accumulation of volume (buying) prior to the signal. This intuitively tells us that people are loading up or hoarding contracts prior to the explosion upwards - with the explosion definitively defined by the Hair Trigger plot (which occurs on bar close). This training video helps describe how that would look with a 10 tick target and stop (although it would easily scale up to other time frames and instruments)...if you're familiar with stock Ninjatrader indicators, you'll see the power of these tools immediately...




If you don't have the EMA Slope Color indicator (a free NinjaTrader indicator, you can click here to get the NinjaTrader Unplugged templates and indicators.

For more information about the Flux Hair Trigger confirmation entry package, you can visit the descriptions on the Trigger Pack page.

To download the template we're using to watch on a Crude 5Range chart, go here.

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Ninjatrader Indicators - using the Parabolic S.A.R. tool

Trading Insights
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I've been using NinjaTrader for close to 7 years now, and have been with them through all the ups and downs of 6, 6.5, and the many multiple versions of 7 that we've been given across the last few years. Each time we have a revision, there are more NinjaTrader indicators that come out or appear on the forums as people became more comfortable with the platform.

I'm a big fan of some of the tools that come out of the box from NinjaTrader...without ever having to purchase another tool from a 3rd party vendor. There are lots of great NinjaTrader indicator vendors, but some of the fundamentally most powerful tools come with the free tools in the standard default indicator list.

One of the tools we love most, is the Parabolic S.A.R. (stop and reverse) indicator. Mostly because Welles Wilder made it - and so far as we're concerned he's one of if not THE father of modern technical indicator analysis of the markets.

According to StockCharts.com, the Parabolic S.A.R Indicator has the following working definition:

"Developed by Welles Wilder, the Parabolic SAR refers to a price-and-time-based trading system. Wilder called this the “Parabolic Time/Price System.” SAR stands for “stop and reverse,” which is the actual indicator used in the system.SAR trails price as the trend extends over time. The indicator is below prices when prices are rising and above prices when prices are falling. In this regard, the indicator stops and reverses when the price trend reverses and breaks above or below the indicator."

I did a video for NinjaTrader's "Unplugged" video series that shows a really novel way of using this Ninjatrader indicator to identify trend entries. Traditionally, you might pair the SAR with an indicator called the A.D.X. and watch for strong enough trends to trade. I find using an Exponential Moving Average that changes color as the slope changes direction is almost as good, and easier to follow.

See if this makes sense as the start of a rules based trading plan:




If you'd like the template I created for this chart, and want to download the EMA Slope Color indicator for free, just go to our NinjaTrader Indicators "unplugged" page and let me know you want them. I'll send you a link to our DropBox and you can download it right to your Desktop.

It takes about 5 minutes, and works really well if you apply the Parabolic SAR to a range, or a tick bar in the market you're trading....remember, minute based bars can be whippy, and we lose the "structure" of the market that is much easier to see when using range, tick, or renko bars. Identifying trend entries - entries with a determined stop loss pain threshold can be really easy when you pair these two NinjaTrader indicators together like in the above example.

Click here to get the NinjaTrader Unplugged templates and indicators.

 

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This 60 minute session will review the basic concepts of the Flux tool set, and help you understand why the Institutional traders have a vulnerability, and how we can exploit that vulnerability inside of a rules based trading system and money management strategy.

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Predictive indicators for NinjaTrader using data mining

Trading Insights
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I've been using NinjaTrader for close to 7 years now, and have been with them through all the ups and downs of 6, 6.5, and the many multiple versions of 7 that we've been given across the last few years. Each time we have a revision, there are more NinjaTrader indicators that come out or appear on the forums as people became more comfortable with the platform.

In the past 5 years, there has been a resurgence of interest in predictive indicators in light of several relatively uncontrollable factors. High frequency trading, large institutional manipulation, as well as trading algorithms have altered the trading landscape and really affected the way traditional technical indicators were originally designed. Things that you could have seen, easily - with say an RSI indicator or a MACD - even with Fibonacci retracements just don't work the same as they used to anymore.

Nial Fuller of LearnToTradeTheMarket.com has some great insights with regards to lagging versus leading indicators. He argues taht "Price action is the most clean and logical way to analyze and trade...", and that lagging indicators that were designed to follow price action are second hand delayed information versus first hand accounts of what was really happening.

I believe, and have observed, that we can take Nial's obserations one step further. And it really boils down to human psychology on several levels - psychology that makes designing predictive indicators much simpler, conceptually.

People do the same things, at the same times, over and over again. According to a groundbreaking study by Northeastern University, "Human behavior is 93 percent predictable".  Building predictive indicators for any market, citing the work of Distinguished Professor of Physics Albert-Laszlo Barbasi, becomes much easier. According to Barbasi, "Spontaneous individuals are largely absent from the population...". The paper's author Chaoming Song says, "...despite our heterogeneity, we are all almost equally predictable".

 

Historically, people have attempted to predict where the market's are going next - developing a predictive indicator - not taking human behavior patterns into consideration. Rather, they have traditionally focused on cycle theory. This idea centers on the concept of things like waves....sine waves for example. Detecting their presence in the market - identifying where in the cycle we currently are right now, and then extrapolating out into the future where we should be next with regards to price versus time. This idea of "anticipating turning points" was popularized by renowned technical indicator developer John Ehlers of MESA software fame.

Our Northeastern University studies would suggest, with regards to predictive indicator development - that analyzing human behavior patterns over time would be the best approach. If people are in fact 93% predictable, despite their observed diversity, those patterns should emerge in a way that we can observe and confirm.  We should be able to use a data set of predictions before a market opens, observe the behavior over the course of the market, and then see a clear pattern which exceeds a 50/50 coin toss with regards to the question, "what did we anticipate the market doing at these times?"

If you're day trading, start looking for these patterns in time with your charting software. Look for times of day where you notice things happening relatively consistently. If a time emerges as a pivot time, say 10:08 Eastern time....start going back several weeks and noticing what happens at that time. How many days was 10:08 a pivot time say in the last 10 trading days? This is the starting point towards understanding where some of these methodologies are right - and others of them are entirely wrong. As you start studying the markets with human pyschology - human predictability in mind, finding these times - marking them, and then waiting for the next repetition of movement at that time in the future becomes the clearest path.

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This 60 minute session will review the basic concepts of the Flux tool set, and help you understand why the Institutional traders have a vulnerability, and how we can exploit that vulnerability inside of a rules based trading system and money management strategy.

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The best free Ninjatrader Indicators I've ever used

Trading Insights
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I've been using NinjaTrader for close to 7 years now, and have been with them through all the ups and downs of 6, 6.5, and the many multiple versions of 7 that we've been given across the last few years. Each time we have a revision, there are more NinjaTrader indicators that come out or appear on the forums as people became more comfortable with the platform.

I've really enjoyed how NinjaTrader indicators mimic Google or Apple "apps", in that the community is always growing with many valuable "apps"/indicators for NinjaTrader indicator users being free. Many are just only slightly better than what you get from the default NinjaTrader indicator list. But occaisionally, you come across one that makes your heart skip a little beat. That one indicator that has the potential to unlock that last little tumbler you've been looking for to help you get to the next level of your trading. The one you save on multiple hard drives so you won't lose it  - especially if the original author smartens up and takes it down off of the website.

For me, that one indicator was the "Divergent Input Series" indicator, written anonymously for the NinjaTrader community. The Divergent Input Series indicator - at first glance, is very normal, and very simple. Some of it's results are fairly ho hum, in fact. Most traders have been taught to look for divergence from their very earliest days of trading. Divergence, simply put, means if price is going down, and your other oscillating indicator is going up - you should fade the move. Or, if price is going up, and the secondary oscillator is going down, you should similarly fade the move.

Most people apply these types of indicators to standard things like MACD, RSI, or STOCHASTICS - indicators normally found in the NinjaTrader indicator default list. But when you get the Divergent Input Series indicator, you notice that you have access to EVERYTHING in the Ninjatrader Indicator list to reference as a secondary oscillator.

Here's an example of a typical MACD style divergence indicator for Ninjatrader:

Standard Divergence Indicators

Standard Divergence Indicators scan for highs and lows of price action to differ from the highs and lows of the oscillator

I've noticed that one of those tools works best, when applied to this tool - and it's not what anyone would ever usually think to apply. It's the "VOL" indicator from the NinjaTrader indicator drop down list. When you use these two things together - you essentially have a powerful volume spread analysis tool - for free. Most VSA programs cost upwards of a thousand, or two thousand dollars. Their job is to show you when volume is doing something different, relative to price action.

Most analysts would agree that volume spread analysis is one of the only PREDICTIVE indicators around. Volume divergence generally PRECEDES the move, or the reversal, as insitutional traders are buying INTO the low, or selling INTO the high, to get the best price. Here's a screenshot of what this tool looks like on the Emini S&P (it works best on range, tick, and volume bar types....good on minute bars, but better on "non-time" based bars):

Divergent Input Series

Divergent Input Series on Emini S&P 3 range chart, with free "Ema Slope Color" indicator for trend determination

Simple strategies work better than complex ones

When using this tool, I like to turn the "show swings parameter" to "False". I lower the swing size values to a bare minimum - either a 1 before 1 after, or 2 before, 2 after - and that helps me see the pullbacks with trend. See, institutions will buy into lows to get the best price before the next run up - and that's when the green arrow appears. If you've ever seen a run away up day and sat there unprepared to trade it - you'll thank me later for this tool and this post. Similarly - on days when the market is falling like a hot rock, check what happens at the red arrow plots when the institutions are selling into highs:

Trade the red arrows

Trade the red arrows in the direction of the red trend at volume divergent reversals....

As you can see - when you're filtering against trend, you find virtually every "peak pullback" before the hammer comes down - or before the next launch up as the institutions sell or buy into the pullback. See, you can't "hide" volume. It's one of the purest, most predictive tools you can watch - and when analyzed against price action becomes a deadly leading predictive indicator.

I've uploaded the indicator file, along with the template you need to recreate the charts I've created here in a Dropbox download link. I put it in the area of our website we call "NinjaTrader Unplugged" where we give away indicators and templates that help traders do more with their base platform - using standard and free NinjaTrader indicators to help them get their trading up off the ground.

To get the indicator, and the template files with my settings, simply click here:

NINJATRADER INDICATORS UNPLUGGED

If you have any questions about this indicator, or the template files I've uploaded, you can email me at michael@backtothefuturetrading.com, or hit me up on Skype, at "Integra-Michael". Let me know how you like the tool, and if you use it successfully in your trading!

 

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1 NinjaTrader Strategy you wouldn't think would work

Trading Insights
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Most traders search for a "traditional" strategy when in pursuit of profits. After about 6 years of conversations with futures traders - both struggling and profitable - I've discovered a few things when it comes to building a successful trading strategy using NinjaTrader - or any other platform for that matter that are important for consideration. 

Ask any trader whose been around a while if they've ever come across a scenario like the one I'm about to describe, and I'd warrant a guess that about 90% of the hands in the room will go up in agreement:

"......you purchased a program or a strategy that worked really good for a short amount of time....say 3-5 weeks or months, and then the results just started falling apart when the market conditions changed....a method or a strategy that was undeniably profitable was after a point seemingly incapable of being profitable...."

Seems like many traders have been there, and have had that experience. I've learned a few things after talking to the guys who persevered through that experience, and here's what they've all said (more or less).

 

Simple strategies work better than complex ones

I've worked with professional NinjaTrader strategy programmers, professional traders, and even the lead tech's at NinjaTrader corporate and there's been one commonality when it comes to the question, "what does a successful NinjaTrader strategy or methodology look like?".  Everyone says the same thing - the most profitable traders have the simplest strategies. In even more specific terms, they have fewer than 3 indicators working simultaneously to determine their entries and exits.

James O'Shaughnessy says this about the perceived success of complex trading systems:

".....We also prefer the complex and artificial to the simple and unadorned. We are certain that investment success requires an incredibly complex ability to judge a host of variables correctly and then act upon that knowledge..."

In a public research paper, Brian Leip studied the effectiveness of complex forex trading strategies as opposed to simpler forex trading strategies. In his own study of over 60 available trading strategies, he concluded the following,

"Overly complicated systems collapse under their own weight and the technical trading tools must be selected carefully. Similar to the writing process, perfection in trading systems 'is achieved, not when there is nothing more to add, but when there is nothing more to take away.'"

 advanced versus simple strategies

As can be seen, there is a only a marginal increase in profitability from a 'complexity level 2' system (68%) to a complexity level 6 trading strategy (71%). The author concludes in his thesis that phrases like "the trend is your friend", and "keep it simple, stupid" are to be applauded when constructing a strategy - in NinjaTrader or any platform for that matter.

 

Building Dynamic Components into strategies

Across the board, traders will confess that their "secret ingredient" is one that allows their strategy or methodology to change as the conditions of the markets change.  Some traders call this a "dynamic" trading system, as the system itself changes over time.

Some examples of dynamic trading strategy indicators include technical indicators such as the ones that can be found in Ninjatrader's indicator list like ATR (average true range), ADX (average directional index), Parabolic S.A.R., or the VIX - as these are indicators that flex and change with the market(s).

dynamic trading strategy

 In this dynamic example using NinjaTrader indicators, we see the use of the Average True Range for both stops, and targets. The trail stop (green triangles) is following a 2.786 ATR value away from price action. The targets, once the trend trade is entered is 3x the ATR, and then 6x the ATR. Note how the ATR values change throughout the trading day - allowing the trader's system to flex as the market volatility increases, and decreases.

In their paper, "Mapping the Intraday Price Movement in the S&P Index" , technicians constructed a relatively fine resolution (60 minute increments) study of positive (bullish) and negative (bearish) behavior. When we first look at this study, you'll note that there is a significantly large number of positive periods in the ten o'clock hour, as well as in the four o'clock hour. The majority of the returns from the ten o'clock session come from the pre-market session.

Dynamically incorporating turning times of the market

When you begin to understand that simplicity and dynamic components enhance the profitability of any NinjaTrader strategy, your mind becomes open to unique possibilities.

Many of the traders from BTTFT.com have incorporated turning times into their overall trading strategies. Using a 2,800 bar look back into historical data (which allows us to adapt as market conditions change) we see that we can "harvest" the times lately that the market is actually turning or trending at. Maintaining a 2,800 bar look back allows us to always be searching into the markets most recent timing patterns as opposed to a static one time analysis that never changes or updates.

data mining market turning strategies

This adaptive Flux indicator finds the most recent turning times of the market, lately

 In this user submitted example, you can see how this trader look for cumulative bid-ask patterns at the times the market is turning, lately - using that dynamic 2,800 bar look back. In essence - his trading system says, "I will be a buyer when I see positive net volume accumulation at a TIME the market has been going up almost consistently, lately (across the last 2,800 bars of historical data). " As the market turning and trend times change, his system adapts to the new behavior patterns and allows him to capitalize and flex with the new patterns

trend trade with volume and time

 

Conclusion - when building a new methodology or strategy in NinjaTrader - avoid complexity and err on the side of simplicity. It makes the system easier to test, and forward implement. You're also more likely to stick with it, because you understand "why" you are taking the trade. I've seen systems so complex, you weren't sure that it was working correctly or not, as it was nearly impossible to test. Second - build a dynamic trading element into the system that allows you to shrink as the market shrinks, and expand as the market expands. Adaptability is key to maintaining your sanity, and keeping your trading system alive more than that dreaded 3 to 5 month shelf life we've all become accustomed to.

 

 

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Gann trading without the college courses

Trading Insights
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The Trading Information Renaissance

William Delbert Gann was born June 6th, 1878 ...the son of a cotton farmer. He started trading when he was 24 years old, and no trader before or since has arguably been spoken about more. Many, crediting him with the most valuable insights and teachings in the 20th century. Others, deeming his work invaluable, irrelevant, or simply impossible to decode and use practically. Gann trading subsequently has been a hot topic of debate for over a century.

WD Gann lived in what I call the "Informational Renaissance". His trading career and subsequently his body of work was written at the same time two other great traders and future educators were studying and coming to their own conclusions, namely Ralph Elliott and Richard Wyckoff. Ralph would go on to say that the market was entirely predictable based on internal wave structure and patterns inside of those waves. Wyckoff would later be recognized as the father of modern Volume Spread Analysis, or VSA, espousing that the markets were also predictable based on internal volume measurements.

The 3 horsemen of the Trading Information Apocalypse

The 3 horsemen of the Trading Information Apocalypse

Gann followed a third, and different path....involving Time. According to Gann in his Forecasting by Timecycles Course,

"TIME is the most important factor in determining market movements and by studying the past records of the averages of individual stocks you will be able to prove for yourself that history does repeat and that by knowing the past you can tell the future. … There is a definite relation between TIME and PRICE..."

As a leading indicator developer, I'll admit Gann's body of work intrigued me. I was especially interested how he incorporated the working knowledge of his spiritual beliefs in with his scientific observations. They were seamless to him, and as such formed his opinions as to the "why" of the things he observed were happening. The "what" of his studies I believe, were influenced by a fourth man who was born when Gann was born, and died within a year of Gann's own death. A man who changed the scientific world as much as Gann changed the trading world....Albert Einstein.

 

An unlikely but important relationship

You had to know who Einstein was, if you were Gann. Gann confessedly studied everything he could find:

"After exhaustive researches and investigations of the known sciences, I discovered that the Law of Vibration enabled me to accurately determine the exact points to which stocks or commodities should rise and fall within a given time. " - WD Gann

Einstein certainly would have been cited in his exhaustive research of the "known sciences". What people haven't realized until now is how closely unified their work was and how greatly Einstein influenced what Gann observed in the movement of the markets. When you see their quotes mirrored together, it starts to become obvious...

Albert Einstein: “Concerning matter, we have been all wrong. What we have called matter is energy, whose vibration has been so lowered as to be perceptible to the senses. There is no matter.”

WD Gann: "
After exhaustive researches and investigations of the known sciences, I discovered that the Law of Vibration enabled me to accurately determine the exact points to which stocks or commodities should rise and fall within a given time. "

Albert Einstein:  "Energy = Mass times times the speed of light squared".

WD Gann: "There is a definite relationship between TIME and PRICE".

It's not hard to see how the works of Einstein influenced the observatiosn of Gann in the markets

It's not hard to see how the works of Einstein influenced the observations of Gann in the markets

This is a very, very important foundational understanding to Gann's work. Understand that for Einstein - energy and mass were unified - that is to say - the same substance in different forms. When you were looking at something solid...it wasn't really solid. It was something very small vibrating back and forth so fast on a molecular level that it appeared solid. Solid things could be converted back and forth from solids to energy and from energy to solids.  Gann saw the same thing's Einstein happening on a universal level, at a market level. Gann concluded that Time, and Price, were the same substance in different forms. When you were looking at a solid price bar on a 60 minute time frame, it wasn't really solid. It was price action vibrating on a smaller 15, 10, or 5 minute level between support and resistance.

When Gann saw a price candle, he didn't just see a price candle. Every price candle had 2 components....it had an open high low and close "price" component, but it also had an associated support and resistance level component. Listen to what he says in this very practical revelation:

Now, by a study of the TIME PERIODS and TIME CYCLES you will learn why tops and bottoms are found at certain times and why Resistance Levels are so strong at certain times and bottoms and tops hold around them..…."

Granted, there are a lot of subtleties to some of Gann's higher level teachings, but the bulk of what we've discovered to be the most pragmatic approaches....the 'meat on the bone' with the easiest to follow and replicate techniques are the following:

a. Find the time cycles he was referring to, by doing what he said - studying the averages of the historical data of the market and time frame we're studying

b. When the time cycles arrive in the future, associate a support or resistance level to those time cycle candles - that is to say, assign a resistance level to the price candle that appears at the forecast time.

c. Observe how the markets "vibrate" between the TIME-PRICE resistance levels. This vibration controls where the market will go, and how long it will take to get there. 

Here's an easy exercise....go back on the time frame you trade....say a 5 minute Emini S&P Chart. Keep track of the times of day that the market has been forming pivots in price. Do this for the past 14 days. Store the information in an Excel sheet with columns that are easy to spot trends and confluence with. After a few days, you're going to notice that certain "times" are hot spots in time....times where the market almost always reverses.

Now, pick the top 10 times from your analysis, and project them forward to the next trading day. Say one of your times was 10:09. When the market gets to 10:09, draw a vertical line through the candle, and then a horizontal line AT THE CLOSE of the candle. You're going to observe 2 things. First, 60-70% of the time, the market will turn again, at that time. Second, 65-70% of the time, the market will bounce at the resistance level you drew. This one exercise takes about an hour to perform, and will make you more of an advanced Gann trading trader than 80% of people who try to understand what he was teaching.

I did a quick study of the Emini Dow using Gann's formula....watch what happened at the times I uncovered in the Mini Dow....and observe what happens when we use their close candle levels as market support and resistance in place of conventional support and resistance methods:

When Gann trading, finding cycle times and resistance levels isn't as hard as some courses would have you believe

When Gann trading, finding cycle times and resistance levels isn't as hard as some courses would have you believe

 

Gann trading is another way of saying "data mining"

The idea of the markets being predictable is not a new one - and was first demonstrated as such by WD Gann back in the 1920's and 1930's. Gann theorized that the markets were projecting future movements in time, via the averages of the past movements of the instrument. Specifically, " by studying the past records of the averages of stocks you will determine for yourself that history does repeat, and that by knowing the past you can tell the future". The modern day equivalent of that technique involves data mining - a technique championed and funded as of this article by C.I.A. and leading hedge funds through a software company called "Palantir" whose "Prisim" software studies the market's complex timing patterns and feeds traders and algorithms the best times to trade as per the results of the data mining.

BackToTheFutureTrading.com produced a retail-trader friendly Ninjatrader indicator version of this data mining software that studies the past records of the averages of any instrument between 1 minute and 240 minutes to discover the times the market has been moving up, or down - consistently - for how long and in what direction. Similar to the Tradestation study above, they've discovered that these sorted times discovered by the data mining software are accurate about 70% of the time out into the future of the market the next day. This allows traders to sit and wait at pre-determined times and wait for moves to form and take off, as opposed to the conventional technique of applying multiple lagging technical indicators to a chart and using that lagging information to base an idea for what the market will do next.

There's a little more to this, and I'd like to give you some more training if you're up for it. Please take advantage of our demonstration offer below to learn more practical techniques to Gann trading without spending a decade of your life reading dusty books in an ancient library. With modern trading computers, this gets even easier, and more practical.

 

 

 

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This 60 minute session will review the basic concepts of the Flux tool set, and help you understand why the Institutional traders have a vulnerability, and how we can exploit that vulnerability inside of a rules based trading system and money management strategy.

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3 Market Timing Strategies You Won't Find Online

Trading Insights
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Definition: The attempt to anticipate of predict the future movement and direction of a market, historically through the use of technically based indicators or fundamental economic data

I believe many traders, especially 'professorial' types believe the markets are always "efficient", meaning, it's relatively impossible to time any market. They believe that at any given point in time, the market is digesting all available information...and filters that information through buyers and sellers to find the "best price". There's startling evidence to the contrary though, especially in light of the evidence from traders who use market timing strategies successfully to accumulate better than market average profits year after year after year.

Jack Schwager in his book, "The new market Wizards" wrote this in regards to the 'efficient market theory':

"After interviewing some several dozen profitable successful traders, I have come to the conclusion that the markets are not random".

There are 3 market timing techniques that both relatively new traders as well as seasoned veteran market traders can employ to see an immediate increase in success when employing market timing strategies

 

Annual market timing cycles

When looking at market charts, especially daily charts, it's relatively easy to discover days that are "pivot days"...days where the market direction changes and the trend reverses anywhere between several days or longer. What most traders don't know, and what many trading companies don't teach, is that these days, year after year after year, produce reversals out into the next year. That is to say, if you scan back across the previous one or two years worth of pivots, and project those dates forward - you'll see that the past pivot dates of the prior 365, 730 days turn out to be the pivots for the upcoming year.

 

market timing strategies with daily bar data mining

 

 

In the above chart, you'll see what happens at the days from the prior year's movements and pivots. Note the percentage of times that the market turns on those dates the following year. This powerful technique is very rarely taught to beginning traders because of its relative ease of study and forward implementation. Many traders are overwhelmed by the rapid inflow of information from live tv feeds, as well as complex assortments of technical indicators - as opposed to discovering years later that it was simply "time" for the stock or index to go up, or reverse.

Many veteran traders ascribe these daily bar reversals to large institutional fund balancing...times of year when heavily traded portfolios involving these instruments are sold off to pay for dividends and subsequently liquidated. Whatever the theory behind it, these powerful daily market timing pivot strategies are relatively simple to study, and powerful - statistically speaking- when those dates are projected into the next year's market.

 

Intraday market timing strategies

Intraday performance of the major equity indices has an observable and cyclic/repetitive/rhythmic structure. Traders that have a few years of experience will tell you that they are waiting for a "10:00 reversal" or are looking to buy "weakness on the 2:15 dip". Are there time periods - statistically speaking, where the market is most likely to reverse - go up or down? A few years ago, Tradestation did some intraday studies with regards to times of market throughout the day and found some very interesting trends. While a certain degree of price movement will always be random, we'll see that there are biases - "self fulfilling prophecies" that can provide a statistically relevant edge with regards to market timing strategies intraday.

market timing strategies tradestation

 

 

In their paper, "Mapping the Intraday Price Movement in the S&P Index" , technicians constructed a relatively fine resolution (60 minute increments) study of positive (bullish) and negative (bearish) behavior. When we first look at this study, you'll note that there is a significantly large number of positive periods in the ten o'clock hour, as well as in the four o'clock hour. The majority of the returns from the ten o'clock session come from the pre-market session.

As we go back to 1987, 21 out of the 25 events had average gains that were positive for the four o'clock interval, or approximately 84%...far from a 'random' distribution. Moreover as we look closer, it appears that the market 'rests' in the eleven o'clock hour after it's initial morning run towards positive gains. Even closer examination shows that if stocks close higher on average into the three o'clock time period the probability of their moving even more upwards into the next hour is almost seventy percent. Again....far from average.

 

Incorporating data mining to uncover leading intraday turning times

Finally, there's an exponential surge in the equities and futures, as well as forex markets of algorithmic trading. Computers that are programmed to trade for the large funds and investment institutions. This phenomenon has breached the half way point, with over 60% of US and UK funds being traded electronically and programatically by these algorithms.

The idea of the markets being predictable is not a new one - and was first demonstrated as such by WD Gann back in the 1920's and 1930's. Gann theorized that the markets were projecting future movements in time, via the averages of the past movements of the instrument. Specifically, " by studying the past records of the averages of stocks you will determine for yourself that history does repeat, and that by knowing the past you can tell the future". The modern day equivalent of that technique involves data mining - a technique championed and funded as of this article by C.I.A. and leading hedge funds through a software company called "Palantir" whose "Prisim" software studies the market's complex timing patterns and feeds traders and algorithms the best times to trade as per the results of the data mining.

BackToTheFutureTrading.com produced a retail-trader friendly Ninjatrader indicator version (in our opinion) of this data mining software that studies the past records of the averages of any instrument between 1 minute and 240 minutes to discover the times the market has been moving up, or down - consistently - for how long and in what direction. Similar to the Tradestation study above, they've discovered that these sorted times discovered by the data mining software are accurate about 70% of the time out into the future of the market the next day. This allows traders to sit and wait at pre-determined times and wait for moves to form and take off, as opposed to the conventional technique of applying multiple lagging technical indicators to a chart and using that lagging information to base an idea for what the market will do next.

 

data mining market turning strategies

 

 

In this chart, you can see what the data mining software discovered could potentially happen the next day. In the bar chart on the right, you'll see what actually happened at those times the very next day, some 24+ hours later. Analysts theorize that the ability to study the markets this way and project turning times forward into the future (a data mining market timing strategy) only increases in efficiency as more algorithms are programmed to trade electronically.

To verify this is happening, traders can (using an excel sheet) use the same technique described above for daily bars go back and see what times over the past 2 weeks the market is acutally turning and trending at. After a few hours of study, any intraday trader will discover that there are certain times, on certain days, where the market has a 70%+ chance of going up or going down....defying academics who claim the market cannot be forecast.

One trader interviewed by Schwager in his book said this to those academics, "That's why their professors, and I'm making money trading".

However you want to address it, the market you trade is not random. We've uncovered these, and even more sophisticated techniques for uncovering "what the market will do next". The more we study these techniques, the more we're convinced that Schwager's traders were right...and deservedly profitable.

 

 

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Ninjatrader Indicators

Trading Insights
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Most people start out using the free Ninjatrader indicators that come with their platform, only to find that many of them are either too lagging, or too "simple" to use in any robust trading plan. In 2008, we decided that in order to compete with algorithmic traders, and professional institutions with trading computers, we would have to begin to separate ourselves from conventional Ninjatrader indicators, and popular Ninjatrader indicators vendors and begin developing our own tools that were based on things we were actually seeing happening in the markets.

One of the most important discoveries was the Flux Histogram tool in our Ninjatrader indicator arsenal, shown here:

This tool was designed to study the historical price bars of any instrument, between a 1 minute and a 240 minute time frame and search for recurring time based price movements in any market. We compared the leading results of this tool against other Ninjatrader indicators, and were surprised to see that the software was able to reveal trades that were coming - trades that hadn't happened yet - but had a high likelihood of happening based on their tendency to appear at certain times, on certain days. We discovered the shift that everyone in the trading communities had noticed - that the "humans" were no longer trading the large institutional accounts. Humans that used to used conventional style Ninjatrader indicators were now passing that authority over to trading computers loaded with powerful programs and algorithms. The institutional traders, the "humans", men and women that were previously using tools such as RSI, Fibonacci retracements, Stochastics, and other similar tools like those found in the standard Ninjatrader indicators list had shifted responsibility over to highly advanced and powerful trading computers with their own indicators - and their own rules - devoid of human emotion and error.

Nearly every tool designed by the developers at Backtothefuturetrading.com are Ninjatrader indicators that address the power of these trading computers, and use their "computer minds" against them. By analyzing the data left behind by these computers, the data available to every retail trader, it's our opinion that we're able to uncover patterns that are invisible to the human eye - patterns that stand out though dramatically to a computer's "eye". Our Ninjatrader indicators are based on thousands of bars of historical data bar analysis that reveal patterns that are "forecast" into the future. When we look at what happened at the times that were forecast days in advance, we have charts that look like this one: (click HERE to enlarge)

Ninjatrader Indicators Flux

We're excited that you found this site. If you're here, it means that you, like us and many thousands of retail traders have graduated from "training wheel" indicators that most people realize don't work over time, to a style of trading that requires you to analyze the market you trade "inside out". You've decided that you're not playing anymore, and have gotten serious about your trading plan and your profitability.

We want you to see how powerful Ninjatrader indicators can be - but you have to take the next step by wanting more information about these tools for yourself.  Take a moment to get that information by letting us know you're here and want to learn. We'll send you forecasts for the market you trade 2 days in advance, as well as our customized three part training series that will help you understand why most Ninjatrader indicators are harder to use than you think they should be....

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This 60 minute session will review the basic concepts of the Flux tool set, and help you understand why the Institutional traders have a vulnerability, and how we can exploit that vulnerability inside of a rules based trading system and money management strategy.

Watch The Demo - TODAY!

Trading time cycles

Trading Insights
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Trading time cycles can be challenging. Many of the time cycles that people look at when they are trading are based in very theoretical and murky waters. They end up in pretty subjective pools - either fibonacci or gann....wave theories...trading time cycles can be a very alluring but often times very ambiguous endeavor. It becomes a very subjective thing. When you find a guru in your pursuit of mastering these things, the guru only serves to frustrate you as they apply a constantly shifting set of rules when they are trading time cycles. It's never the same thing twice.

When trading time cycles with the Flux indicators, people can be faced with the same challenges. How to remove the subjectivity? How to make it less ambiguous...something that can be back tested, with signals that don't disappear and reappear, or the most carnal of trading time cycle indicator sins - repaint.

When we applied the Flux programs to the market data, we had a test for robustness. We wanted to see:

a. consistency across time frames

b. consistency across instruments

c. demonstrable statistics above the 60% barrier. Non-subjective statistics.

When you are trading time cycles with the Flux software, it's important to remember that. I forget, quite frequently, to check across a full range of time frames in the markets we study. I personally when watching markets have an aversion to going past 3,5 minute time frames. But see why that's a self harming characteristic in this example.

Look at how the Flux time cycles appear on a 5 minute chart in Gold Futures: (click here to enlarge)

Gold Futures, 5 min chart with Flux Time Cycle Markers

Do you see the consistency of the cycles as they appear on the candles? Each one of the marker times were known a week in advance. Their color. Which candle they would plot over or below. We want to see the confluence of signals near or close to actual market movements as a guide.

But now look at the same market, analyzed with the same tools, on a 240 minute time frame. A scaling factor of nearly 25.... Click here to enlarge:  http://screencast.com/t/V9aq3pBwgPwL+

Trading time cycles on Gold with Flux markers, 240M chart

 

That's what we want to see. These trading time cycles coming in on different time frames with the same consistency.

First, we have to pass the "eyeball" test. Are the forecast time cycles actually coming in at the highs and the lows that we were waiting for? From these charts, it would appear so.

Objectively though, does the evidence hold up? Or are we deluding ourselves like so many other traders to when they are trading time cycles?

In my next post, I want to show you the statistical evidence of the existence of these time cycles. It's pretty compelling - and we were excited, and nervous the first time we ran this strategy...

 

 

 

 

 

 

 

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This 60 minute session will review the basic concepts of the Flux tool set, and help you understand why the Institutional traders have a vulnerability, and how we can exploit that vulnerability inside of a rules based trading system and money management strategy.

Watch The Demo - TODAY!

Time and price predictions

Trading Insights
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Time and price prediction methods and techniques for trading the futures, forex, equities, and commodities markets are possible now using the full processing power of your trading computer. Time and price predictions, as a concept, have been discussed for the last 100 years, and were probably made most famous by the trader, WD Gann - whose study of the market "vibrations" led him to conclusively believe that both things were accurately predictable. Listen to his quotation from his Time Cycle Forecasting course,

"TIME is the most important factor in determining market movements and by studying the past records of the averages of individual stocks you will be able to prove for yourself that history does repeat and that by knowing the past you can tell the future. … There is a definite relation between TIME and PRICE..."

What most traders who are looking for time and price confluence in their trading don't realize, is that you don't have to study Gann for dozens of years to decipher his cryptic writings. Time and price predictions and confluence points are discoverable, with a haunting accuracy - through data mining algorithms programmed into Tradestation, NinjaTrader, and Metatrader.

See these time and price predictions on this Emini S&P Chart, and quickly determine where the time and price predictions "intersect"

Time and price predictions

time and price predictions aligned on the emini S&P

Do you see around 1403, where we are coming into the red lines, at the same exact moment we are getting a signal ?

The red lines, are Flux FPC lines, and tell us the "Price" of the time and price prediction component. It is a measurement of hundreds of pivots at that price, over an analysis of thousands of historical bars. But the good news is that this time and price prediction - is based entirely on the work of your computer, using your software's data mining algorithm. The other good news is that these levels are available to us, long before the market opens. You can use the time and price predictions- and anticipate them - vs. reacting to levels on the fly and in the market that may , or may not, be significant.

If you take one last look at that chart - do you see how you can define your risk, and your reward, at the time and price prediction point? Where they intersect, can you see yourself saying the following,

"The price should not go any farther than HERE"....

"The market should go down, NOW...and not continue upwards".

This prevents you from making bad subjective decisions in the moment - and encourages you to make the market "give you" the conditions you want - where the time and price predictions are aligned like planets, and the water is as safe as it's going to be to get in...

To get your free market forecasts, and see how this occurs in real time, visit our forecast page to see the histograms in advance, and attend one of our live training review seminars at the end of each week:

http://backtothefuturetrading.com/flux-webinar-histogram-forecasts/

Watch A Free Demo

This 60 minute session will review the basic concepts of the Flux tool set, and help you understand why the Institutional traders have a vulnerability, and how we can exploit that vulnerability inside of a rules based trading system and money management strategy.

Watch The Demo - TODAY!