Trading Insights

Trading Insights

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...