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Trading Insights

Higher time frame confirmation for traders

Trading Insights
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When trading higher time frames, traders often look for higher time frame confirmation to identify trend, and establish the dominant trade direction of the markets.

Many traders when studying the higher time frame, often use traditional lagging means of analysis on the higher time frame itself, using a multitude of older techniques. These higher time frame techniques can include trend line identification, position of the market above or below a major moving average, volume coming into or going out from the market, or tests of market support or resistance at the higher time frame.

What's interesting to note, when analyzing the higher time frame with the Flux data mining software, is how these lagging, and older means of identifying trend are often times too late, or much later into the trend turn than is desirable for traders. You have to wait for the turn, to confirm the turn, and on a higher time frame that usually means the trade is long into profitable territory - and traders begin chasing the trend and increasing risk.

Take a look at this chart:

Emini S&P Higher Time Frame analysis

Analyzing the higher time frames of the Emin S&P

Every marker on this chart - every dot - has nothing to do with price action on the screen at the time.

Each dot represents a time, that the Flux software from Back To The Future Trading identified a week before that price bar - as a high probability trend time. The software was telling you -

"Hey, I've analyzed several thousand bars of data, and determined the following times coming up in the future as likely candidates for repetitions of these major runs".

How often do these events repeat? How often are the times relevant, in the future?

Look at the chart for yourself. This 60 minute Emini S&P chart is clearly a higher time frame than most traders that day trade look at. But we clearly see on this higher time frame that the overwhelming majority of the Flux times were actual trend births, and trend deaths. Knowing these exact times put you in the very beginning of the trend, the majority of the time.

With statistics and probability on our side, it would then be possible to identify trend on the higher time frame BEFORE THE TREND BEGINS, and enter small positions early - or take all of the signals that come on the lower time frame, in the direction of the anticipated higher time frame trend.

For more information, and to receive forecasts for multiple markets in advance and attend our weekly webinars, CLICK HERE.

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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 indicator development

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Predictive indicator development traditionally hinges on the idea that a real time market analysis can be made with a real time indicator like a Shaff Trend indicator, or something from the Ehlers series of indicators that have a built in cycle component. However, the markets in the last 2-3 years had fundamentally shifted from a human centric trading model to a machine driven trading model, and predictive indicator development has done little to adapt to the "trend", no pun intended.

A predictive indicator that relies on historical data - however close in the past, has fundamentally missed the definition of "predictive" in the truest sense of using data that has just happened, to interpolate what may happen in the next "x" number of bars. Many of the indicators that use this technique have actually reverted to a "repainting" structure, such as this indicator below on a popular FX site:

predictive indicator

After purchasing the indicator you see that play out in real time, and realize that it's impossible to back test any strategy.  Most predictive indicator developers find that anything with a lagging component is prone to exceedingly high ratios of late signals, or false signals, in response to and by nature of the fact that they are calculating based on X bars of past in market data. However smoothed or added, predictive indicator developers need to step back and reassess in light of the massive computer trading environment that exists today.

The better solution, when considering predictive indicator development, is hinted at in this excerpt from Businessweek.com:

But as with all Wall Street feeding frenzies, there are dangers. Some critics say that when less experienced hedge- or mutual-fund traders use the software they've bought from Wall Street, they inadvertently expose their trades. How? Canny traders, mainly those who trade on behalf of big banks and brokerages with the firms' capital, may be able to identify patterns of algorithms as they get executed. "Algorithms can be very predictable," says Steve Brain, head of algorithmic trading at Instinet (INGP ), the New York City-based institutional broker.

Did you catch that? To be truly predictive, one needs study and identify patterns left behind by the algorithms of the larger institutions and brokerages. When we apply this technique to a market and study the statistically relevant patterns of the actual algorithms, look at what happens when we sit and watch the times that the algorithms are most likely to move, and judge the performance of this predictive indicator for yourself:

predictive indicator 2

This predictive indicator technique yields considerably more confident results, as we are studying the market itself and watching for patterns that indicate where and when the trading computers are most likely to fire off their trades. Knowing these times, and prices, gives the smaller trader an opportunity to be in the order flow when these algorithms fire their orders off. Using a predictive indicator that measures "what just happened" with any type of a lagging component puts the user at a severe disadvantage.

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!

Time Cycle Indicators

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I liken predictive time cycle indicators to the example of a mailman, or a postman, near my house.

Time cycle indicators as they exist in the world today - in the lagging sense of the words, would have you measure for cycles in the following way.

They would have you listen for the mail truck with a half way decent microphone. It would compare the background noise of your neighborhood to approaching vehicle's engine noises. It would compare the sound coming through the microphone to the known sound of your postman's engine. As it got closer, it could make clearer determinations about the source of the noise. Ideally, the best measurement could be made when the truck was closest to you - or right at your house or property. This is a very rudimentary way to compare modern time cycle indicators and how they use lagging averages and look backs to determine if there is a cycle present, or not. In the end though, you must wait for the comparisons and averages to get really close to the actual event. Only after the mail is delivered, or after the move has occurred on your charts can you say, "yes, the time cycle indicators worked, or didn't work".

We approach time cycle indicators from a completely different perspective. We look at the postman from a purely statistical standpoint. A time cycle indicator should approach the problem from the same angle, and you'll see the results of the difference in the diagram below.

What if we sat inside our homes, with a highly accurate and dependable clock. What if we waited until the postman had come to a full stop at the front of our house, and logged the exact time that the mailbox was opened, and our letters deposited? After a few weeks, we might have a data set that looked like the following:

 

T1: 11:02

T2: 11:08

T3: 11:01

T4: 11:06

T5: 10:58

T6: 10:55

T7: 11:02

T8: 11:08

T9: 11:05

T10: 11:07

We could do any one of a number of things with this data - especially in the light of our time cycle indicators question. It's not hard to see, that there is a clear behavioral pattern - or cycle - taking place here. It would be foolish, for someone to go outside and wait for their mail at 8:00, for example. Or, when an important letter was needed, to wait until 2pm to go outside and check the mail. There is clearly an optimal time to base our activity on, in the context of the statistical data of our "postman" time cycle indicator.

A hand drawn chart might resemble something like this:

 

You can begin to see the statistical significance of the cluster. There is a window we SHOULD be watching for the event to occur, based on observable real world events, or behaviors.

If we do the same thing with trading data - in particular applying these techniques to  market based time cycle indicators we see charts that begin to emerge like this one:

 

time cycle indicator

Flux time cycle indicator with histograms

 

Low and behold, we see cycles that emerge statistically in the data. "Mail deliveries" where the market is buying, and selling, with repeated regularity in the market that we are watching. In this case, we're not measuring real time and guessing if something could be a cycle or not. It would be akin to our example above, and "listening" for engine noises that sounded like the Jeep we were waiting for that had the mail in in every day. Maybe the noise wasn't a Jeep. Maybe it was a Ford, or a Gremlin, for that matter with a modified exhaust. Listening for these time cycle indicators with lagging indicators like MACD produces false results that completely ignore the premise of the experiment. There are TIME BASED CYCLES that exist in the market. If that's the case, than we should see repetition of behaviors at those times, across a statistically significant period of events, or a large enough data set to be convinced. Moreover, if we use this strategy with a forward looking or predictive set of time cycle indicators, than we should see the result we're expecting occurring at those times, a statistically significant number of times (ie more than half).

If we apply that hurdle to our forward looking time cycle indicators, and place markers at those times we are expecting the market to trend up, or down, here is what we start to see:

time cycle indicators

Flux time cycle indicator with markers

In this example, much like our "red dot" chart, we see what happens to the trend around the times that we are waiting for trend reversals. Not based on an internal market shift, but based on times that were known before the market opened.  Overall, across a wide range of markets and time frames we find this phenomenon occurring using Flux time cycle indicators that establish behavior patterns before the market opens, and sees those trend and momentum moves play out 60-70 percent of the time after the fact.

There are choices when looking to use time cycle indicators in your trading setups. You can use traditional lagging methods that more or less guess at what is happening, or tell you what "just happened", or, we can use the power of our computer's processors to examine thousands of events in an statistical analysis that reveals events that recur with enough frequency so as to alert us to higher probability trading setups and directions.

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!

Time cycle trading

Trading Insights
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When we first started time cycle trading, there was a phase of unbelief. When we looked at the time cycles generated by the Flux software that depicted the internal behavioral cycles of the markets, we began to really think that we were tumbling down some rabbit hole with no bottom. All of our suspicions about time cycle trading were confirmed by the forecasts and the time cycles provided days and hours in advance of the market actually opening. We started to see that these time cycles were indicative of a market that was no so much random - as it was choreographed and filled with business procedures and routines that occurred with regularity and like clockwork - less mysterious than the random "magical" world we were led to believe existed. Time cycle trading got a whole lot more interesting when we allowed ourselves to believe there was more to the market than random "efficiency".

I took the time today to compare what we're doing with our software to the techniques other vendors are attempting to teach and proliferate in the market. This one chart was of particular interest to me. People interested in time cycle trading that came across this photo probably reacted the same way I did:

time cycle trading

In this diagram, the expert is attempting to show how his software can help you discern trades using Gann's teachings of "squares". This is a direct quote from the website:

"...Because the next 2 days is Saturday and Sunday, so I tried to start the square from these two days and find some vibration on 30, 45, and 67.5 (2/3) days. We can reasonably assume a 90 days high if the price is approaching the 90 days from low."

I've read through the page now a few times, and I always ask myself the same question. If someone trading time cycles came across this site, would they be able to determine for themselves what was being taught, and then how to apply it methodically and objectively real time in the markets? How would someone trading time cycles approach an entry or an exit - and would ten people following the same teachings all arrive at the same conclusions? How firm are the rules of interpretation with someone trading time cycles using this Gann technique? Listen to the next quote...

"I try to find out whether a chart is vibrate under the square of 90 by starting from all the recent highs and lows and visually spot matching turning points (vibrations) in the 8 divisions, especially in the 30th day, 45 day and 60day. 90 days is also 3 months, sometimes this could be the period of an counter trend out od a major trend..."

Trading time cycles had to be easier than a technique developed by a man 100 years ago...a man with no access to computers or online resources, no?

The next webpage in the list of people I came across when searching for "trading time cycles" was a company selling a book about Hurst techniques. In particular, JM Hurst - a man we had come across often in the pursuit of the ultimate time cycle trading techniques. What did they have to offer - surely it would be better than our Gann friend:

"The most surprising thing about our adaptation of Hurst's displaced moving average technique is that you don't have to spend any time doing tedious cycle analysis. Just click on a few bar highs or lows in the training software to get an idea of what periodicity is driving the trend and determine the best displaced moving average set with your eyeballs in the chart window. This becomes second nature after a few tries."

Just click on a few bar highs or lows to get an "idea".  "With your eyeballs in the chart window"? Huh?

For $35.00 and a book later, I could learn the secrets though. No worries. Trading time cycles would be easy once I wrote a check. Ok...

Finally, I came across this in pursuit of comparative trading time cycles tools:

"...Plotted below these cycles is the speed of a third planet.  A planet's speed reaches its extremes at perihelion and aphelion, the two points closest and furthest away from the sun. CycleTimer allows you to plot below your chart any combination of planets speeds added together or subtracted." Also, the ellipses were drawn in by hand, after the fact - showing how these were contained with the software's powerful "ellipse" techniques.

So, planetary motion....hand drawn ellipses....these were the tools being offered to traders looking for assistance trading time cycles?

It's no wonder we have such a hard time convincing people that there's an easier way. That these cycles actually exist, in a statistically meaningful way...

Look at one of our charts:

 

trading time cycles

 

In our charts, it's fairly simple. There are red dots indicating a trading time cycle to the downside is coming. A trading time cycle that historically recurs at this exact time. Same for green dots. If you see green markers, than you are being alerted to the fact if you are trading time cycles that now - right here - right on this candle - is when you are expecting the market to go up. Time cycle trading can be simpler than you've been led to believe.

If you haven't already done so - register for one of our weekly webinars where we give the forecast times out days before the seminar - and review what actually happened after the fact to determine if these results are statistically significant.  Compare for yourself - if you're looking to learn more about time cycle trading - which one of the methodologies is easier to follow and apply methodically.

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!

Find your trading style

Trading Insights
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The older I get , the more I believe that learning how to trade the markets is one of the deepest processes of self discovery that a person can take on. This is of course provided that the person is highly motivated to understanding the art of trading and has satisfactory introspection and flexibility to learn understand develop and grow.

In the timeline of trying to learn to be a good trader, I think that you are going to have to discover and develop your own personal approach and style. By the word "style" don't think I am saying something weird like "a trader who trades what they see". I think this is a pretty hollow description, and not much better than saying your life's motto is "trying to be a good guy and do the correct thing". It has to be more specific than that. Here's what I mean.

When you sit down and look at yourself as a trader, you can evaluate the following when determining your trading style:

First, the quantity. How many positions or markets are you planning on trading simultaneously? One? Three? Dozens?

Second, what is the basis of the trade. What are you using to make a decision about your positions? Is it a counter trend approach - a trending approach? Are you incorporating support and resistance? Divergence? What is the basis of your trading style?

Third, what type of trading frequency are you going to use in your trading style? Are you planning on entering and exiting positions 1,2, or 12 or 100 times a day?

Fourth, when understanding your trading style you should evaluate if you have a bias. I believe that most people I've come across have a buyers bias - they are bulls - despite the fact that they say they are neutral. I know now after many years that I am a bearish bias person. My trading style incorporates that bias and makes trading less stressful for me as a result.

Finally - what security will you trade? Do you like the e-minis? Stocks? Blue Chips or Penny? Do you like the Forex market movement - if so, which pairs? What about commodities like oil, gold, or wheat? Maybe binary options? Have you looked at all of these for a time to determine which markets you feel most comfortable in? Your trading style has a lot to do with what markets you're trading.

Understanding your trading style, and giving yourself permission to have this dialog with yourself and ask these questions at all, is a critical function of success. It's better to ask them now, than have to loop around after a blown account or two and realize that you should have determined this beforehand.

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!

Cycle Indicator evolution

Trading Insights
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Cycle indicators have been notoriously lagging in the past, in the sense that they are attempting to measure something that is happening in the market real time. Most cycle indicators are not much different than an RSI for example, which is looking at market conditions as they are unfolding - measuring the average of some internal market value and displaying that value as some type of a moving average cross.

Once such indicators is the Schaff Trend Cycle Indicator that uses slow stochastics and the MACD, as wel as a cycle component to factor currency cycle trends. The indicator is purportedly faster than the cycle indicators that lack a cycle component and rely more on slower moving average cross type components. An example of the STC cycle indicator here shows how the STC cycle indicator generates its buy signal when the signal line turns up from 25 to indicate a long or turns down from 75 to indicate a short:

While this indicator can be called "forward looking" as a cycle indicator there is still the element of waiting for current market conditions to unfold to generate a signal. The down side of this type of a cycle indicator is that it still generates apprehension in the moment. A trader is reconciling what they see with this signal and always wondering if the cycle indicator, in this case the STC cycle indicator is correctly interpreting the market conditions or not, especially in volatility.

The designer of the Flux cycle indicator took this into consideration when he originally theorized that dominant market cycles could be measured from historical data and project forward. Like any other business in the world, the institutional trading conglomerates couldn't operate randomly - and had to have some sort of internal time based guidelines for when large trades were to be placed, and when large profits or losses were to be taken. This concept has elevated the idea of a cycle indicator to an entirely new level.

When the Flux cycle indicator was originally turned on, the designer was looking for graphical representations of cycles in the cycle indicator, as represented by peaks of histograms that showed up clearly as part of a sinusoidal (roller coaster looking) pattern. Here's an example of what is returned from the Flux cycle indicator:

cycle indicator

In this case the user is not waiting for a line to cross so much as they are waiting hours in advance for a specific minute of the market to close, with the time of that minute known specifically days before the market opens. In essence, the cycle indicator is saying...."there is a very strong possibility that the market will sell off at 10:24, as it has done previously wiht statistical significance". This internal behavioral cycle is captured with data mining algorithms and displayed graphically for the trader to visualize the markets dominant behavioral cycles in advance of any line crossing - no matter how good the "cycle component" of the cycle indicator is.

The best way to visualize this is to register for one of the BTTFT online seminars, or fill out the BTTFT personal consultation form to watch the cycle indicators playing out in real time. One of the great advantages of these cycle indicators is that the company can post forecasts days before the online seminars, and then review the outputs of the cycle indicator after the fact and verify the potential robustness of the signals after the fact. This is something very few if any other cycle indicator developers can lay claim to, and can be a very powerful convincing factor for many traders.

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!

Trading Psychology

Trading Insights
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Trading Psychology. It tells you what kind of trader you are.

If we really spent some time upstairs, between your left and right ears, what kind of thoughts would see and hear swirling through your head?

Trading psychology, as touchy and feeling as those words are, are detrimentally important to your overall success as a trader. There has never been in my life, something that required such deep introspection and careful consideration and planning. I've found myself so emotional at one point, that I was sitting in a corner of my walk in closet, in bitter violent tears, with my hand on my heart feeling my pulse and nearly hyperventilating at the thought of what I had risked trading only moments earlier. I'd made a decision that put my entire account equity at risk trading the emini S&P...nearly $15,000 in the heart of a FED announcement. If you don't think trading psychology is critical to your overall success as a trader, you're living in a delusional state. If your're one of the 10 people on earth that don't have an issue with trading psychology - the voices in our heads that drive our decisions all too often - congratulations.

I ask new traders that come to BackToTheFutureTrading.com a series of questions now, that help me determine some things about them early on in the process - things that they may never have considered especially if Trading Psychology was never really a focus of theirs. I ask them to look at a chart and tell me what they see. Do they see trend moves that went on forever, or do the reversals and counter trend setups stand out to them more clearly? Do they think the trades took too long to hit targets, or not long enough? Questions that help me understand who they are in their mental core - questions that most traders unfamiliar with trading psychology don't ask themselves until its far far too late.

I recently came across a very valuable link, to a free Trading Psychology personality test. 35 questions, the likes of whom you'll struggle to understand why you're being asked about in the first place. But at the end of the test, you start to see a pattern emerging, and in the free report you're sent, a picture of who you are - right now - as a trader. Something that helps you understand exactly what's going on in your mind, and why you do the things you do consistently. Trading Psychology, in a free report.

Go here if you'd like to see for yourself: www.tharptradingtest.com

I took mine, and when I was finished I thought - yeah, that makes sense, actually.

Sometimes an outside perspective is important with these things. People see things about us that we're unwilling to admit about ourselves. Trading Psychology is about understanding those strengths and weaknesses, and setting yourself up for success before you walk onto the battlefield each day with your account.

It's encouraging to know that there are other people out there like VanTharp that have put 2 and 2 together in a test that helps us drill down deeper into ourselves and work out all the cobwebs before we lose countless thousands in the process.

 

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!

Trading Psychology and time cycles

Trading Insights
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Trading psychology fascinates me. On the surface, it appears to be the simplest thing to do. See this signal - do this do that, right? But any veteran day trader will tell you - if they're honest - that there's inexorably more to trading the futures, forex, commodities, and equities markets than just seeing a signal and hitting a button.

One of the struggles that I see most new traders dealing with circulate around trading psychology, and over trading - where traders sit at their trading computers hovering over every bar and every tick supposing that they are microseconds away from missing the move of the day. They as a result begin to trade over and over and over again - anticipating moves that never materialize.

Having struggled with this trading malady myself - and being a student of trading psychology, I was fascinated to find this recently released quote from a New York Times article:

"...In its (very long) explanation of this phenomenon (Decision Fatigue), the Times reports that experiments have demonstrated a "finite store of mental energy for exerting self-control." Each decision you make and the more choices you make throughout the day, the harder it gets for your brain to continue to make decisions. The result is that towards the end of the day when you're low on mental energy, you're more likely to either give in to impulses or avoid making decisions altogether..."

No one has ever to my knowledge put the phrase "decision fatigue" into the trading psychology arena. And yet - when we read the above statement, we know existentially of its truth. How many traders have made thousands in the morning sessions, only to give it back plus some in the afternoon? (We should all be nodding our heads if we're honest about the truths of trading psychology).

Decision Fatigue studies like this one are powerful insights into our minds, our trading psychology, and how they affect our profitability as traders. As Jack Schwager put it in his book, "The New Market Wizards", "We has met the enemy, and it is us". Our minders show us how little we understand our minds - and our desperate need to fill that gap.

What I like most about trading the time cycles of the Flux is the appointment nature of the indicators. Time cycles and their studies allow you the mental freedom in trading psychology to take a break - and to plan your trades and setups. In between cycles, there is simply nothing to do but wait. To regroup. To refresh. There are no missed moves. There are only moves inbetween time cycles and time signals. Many traders say, "I know when to wake up at night, and when to sleep.", or, "I know when to get up from my desk and do something else, and when to be back to trade". These are important statements in light of trading psychology, and decision fatigue management.

I hope you'll take some time to study our time cycle indicators if you're not a customer, and if you are - that you'll continue drilling down deeper with your studies and your proficiency in this arena. Doing so is an investment in your trading psychology arsenal - I believe the most critical arena in trading altogether.

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!

Trading in the Zone

Trading Insights
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Listen to this quote, from Mark Douglas and "TRADING IN THE ZONE"...

"...The psychological dilemma that virtually every trader has to resolve is that you may be aware that the next trade is simply a trade in a series that has a probable outcome. Yet you’re still afraid to put the trade on and as such are susceptible to the fear based errors. This is due to our potential to view and interpret market information as threatening. This negative state of mind when you trade means there is a conflict between what you believe is the probable outcome and any number of other beliefs in your mental environment that are arguing for something else.
When you think in probabilities you believe that every moment in the market is unique or every edge has a unique outcome. When this is your dominant belief, your state of mind will be free of fear, stress and anxiety when you trade. If you believe that something will happen but you don’t need to know what it is, then how can the market information be threatening and painful?. You were simply right again.

Every moment in the market has elements of what we know (similarities) and elements that we don’t or can’t know because we haven’t experienced them yet.

Until we train our minds to expect a unique outcome, we will experience only what we know. The other information and possibilities will pass us by as unperceived, discounted, distorted or denied.

Once you truly believe that you don’t need to know and you think in probabilities there will be no reason to block, discount, distort or deny anything about the markets potential to move in a particular direction."

In case you haven't figured out - that phrase in red is what I believe to one of the most important elements of trading, as observed by my conversations with people day after day - year after year.

I may not be the best live trader in the world - but my experience as a clearinghouse for conversations with struggling traders is a unique one. You've maybe spoken with a dozen or two struggling traders - I've spoken with thousands. When you talk to that many people all trying to achieve a common goal you start to notice the similarities between those conversations. You take note of all of the things that people are confessing that they are stuggling with - as well as take not of what the people that are succeeding - are doing correctly.

Trading in the Zone is  one of those great clearinghouses of trader information. It's Mark Douglas saying - "look, I've spoken to enough people - and documented my own struggles enough, to have compiled a mass of similarities. I know enough about what not to do when trading - and what do to when trading - that you should stop, and listen and read".

Trading in the Zone is also one of those books that you probably only absorb 1/10th of the first read through. When you're reading about the zone that you should be trading in, and you start making lists of all of the challenges that are laid out - the new thought processes - and how you're generally failing miserable on all fronts - it becomes clear that this book - somewhat of a holy document - needs to be studied. Notes must be taken. Outlines created - and accountability instituted.

When I was first handed a copy of "Trading in the Zone" by a man I knew who traded, he handed me the book carefully and with the understanding that I was being loaned this copy - that I would be giving it back as soon as I was done with it. He was sincere in his loan, but stern in his understanding that he needed it back - that he probably referenced it quite often and I had a week or two to get the "jist" of the book before I was expected to pass it back over. I'll never forget how serious he was that I read "Trading in the zone", or how serious he was about getting it back from me.

What I love most about the Flux - and the timing cycles we study, is that it's almost cheating when it comes to the principles of Trading in the Zone. That book says you really shouldn't expect something to happen next, and that the next trade could be a very different set of circumstances. The next timing cycle though, and the predictions therein, are based on the fact that the markets do the same thing - over and over - like any other business in the world with procedures and routines. So while Trading in the Zone teaches that anything can happen (and anything CAN happen, don't get me wrong) the Flux tools and the timing cycle indicators that we've developed more or less indicate a very high probability that something IS going to happen. And when you see the conditions for that something start laying out  (stalling pattern, consolidation, double tops or bottoms, reversal bars, volume drying up) at the precise time you were EXPECTING the markets to turn - it's a feeling like no other.

The challenge then lays within constraining those events in a rules based trading plan. What do you do, when you arrive at that trading cycle time? What is your trigger? What is your setup? What are the conditions for your trade? What will you do when you see those conditions congeal? What amount of money will you risk? When will you take profits?

This is where the timing cycle indicators stop, and Trading in the Zone picks up. Ignore it, and these warnings - at your own peril.


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!

7 principles of consistency

Trading Insights
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Mark Douglas wrote, "Trading in the Zone", and was known for his seven principles of consistency - the 7 means of measuring if you were in fact "trading in the zone" or doing something else- usually at the detriment of your trading account.

The 7 principles of consistency relative to flux time cycle trading are especially important, I believe - because you are anticipating something happening, versus sitting at the computer and fretting over whether or not the very next candle will be a trade, or not. The Flux time cycle indicator drills down and says, "don't even bother looking for a signal here, now....walk away".

Douglas says that most traders won't create rules and plans because by doing so, they would be held accountable to a standard by which they could be measured. They would in effect be held responsible for their decisions in the constraints of their plans and trading rules.

Go through each of these seven rules, and you'll note a strong undertone of preparedness. There is a tremendous amount of work that the trader is exhorted to do LONG BEFORE THE ENTRY. There is work done in advance, which enables the trader to act effortlessly in the moment and trade in the zone when the signal comes into existence.

I was watching the markets today and couldn't help but notice that the Flux turning times - the midst of the market melt downs, were 70% accurate. Wait for the right time - jump in - and you were in the flow of the market immediately in the green, 7/10 times, across 32 signals.

I can't think of anything a trader can do, in preparation for a trade - that would benefit their confidence - as much as a time cycle indicator like the Flux.

I think the 7 principles of consistency are a great way to measure yourself - to reflect as a trader and discover if you are fooling yourself into believing your a trader - or acting like a real one.

 

The 7 Principles of Consistency:

1. I objectively identify my edges.

2. I predefine the risk of every trade.

3. I completely accept the risk or I am willing to let go of the trade.

4. I act on my edges without reservation or hesitation.

5. I pay myself as the market makes money available to me.

6. I continually monitor my susceptibility for making errors.

7. I understand the absolute necessity of these principles of consistent success
and, therefore, I never violate them

 

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