Trading Insights

Trading Insights

Predictive trading indicators for market research

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Over the course of the last nine years we have been pioneering money and innovative ways to forecast the markets that people are researching and trading using predictive trading Indicators.  The majority of that time we have focused intensely on shorter-term trade set ups, where most of the signals fall within a one minute to a 15 minute or even a 60 Minute time frame. However in the last several years we have begin to explore new ways to analyze the market on even higher time frames including daily bars and end of day bar analyses.

In the following tutorial video several different methods and techniques for projecting what the major Futures and Forex markets will do out into the future. This indicator focuses on 4 predictive phases, whose arrival dates are known out into the future. Using the 4 energy phases - we can anticipate which phase of the 4 is about to come next, and study what usually happens at that phase. In this sense, this Ninjatrader indicator (as well as Tradestation indicator) is unique in it's ability to tell us what should or might happen in the future. 

We also explore the concept of "exertion" levels at these phases. That is to say, we study how far the market moves on average at each of the past phases when we arrive at them. This can give us some sense of knowing how far to expect a market to move when it eventually does move. We'll usually see 2-3 "groups" of exertion levels, as you'll see in the video. These exertion levels are measured at the dates of the past moves, using the predictive market indicators like the Daily Cycle Marker tool.  We demonstrated this technique earlier in our analysis of the 6B, Great British Pound futures instrument. 

Finally - we'll focus on the support and resistance network of the market. Time has 2 components - Time, and Price - that make up every one of these time events. We can focus on the purely horizontal support and resistance levels of these markets, predicting where a move is most likely to go. In addition - and perhaps more accurately - we can see what the "hybrid" angle resistance lines are doing - hybrid lines being a dominant angle that represents that market's unique combination of time and price. Each market has a unique angle it follows, and the video will describe how to find those lines, and how to project movements out into the future using those lines.

The markets in our opinion are not random - in the sense that we can apply these types of predictive analyses to them using predictive market indicators. See how the ES analysis this one morning allows the moderator to call the high and the low of the day before the move occurs - and then watch with him and the students what happens an hour after predicting the market movements.

 

Predictive analysis of the 6B Great British Pound futures instrument

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I just recently concluded an analysis for a customer who was seeking to understand what the Great British pound Futures instrument he was trading might do into the future. In the video below I demonstrated several techniques that Traders can use when doing research into probabilities concerning how the market they trade is most likely to move long-term.

One of the first techniques I recommend Traders use, whether they are Futures Traders or Forex Traders or even equities Traders is to examine the seasonality of their instrument over several years. For example if you are studying an instrument in March it would be helpful to look at how that instrument moved in March over the past several years. New Traders are surprised to see that there are patterns in terms of price action that repeat year after year after year in the instrument that their trading.

Another useful technique involves measuring how far the moves during that seasonality occur. To see how far these moves occur during these seasonal impulse moves, how far that is to say how many ticks or how many Pips does the market actually move? In the video below you'll see that there are clearly repetitions of movement that is to say measured moves that are occurring quite frequently in the Great British pound the past several years.

We can also use a predictive indicator like the Flux daily cycle markers indicator for ninjatrader to help us anchor the patterns that were studying during these seasonal movements. The Flux daily marker indicator is particularly helpful as it provides anchor points, predictive anchor points for us to look at the movements during the seasonality we're examining and researching. Flux daily cycle markers indicate phase one, phase 2, phase 3, and Phase 4 market movements. What  the market does at each of these phases during the season we're examining can give us a clue as to where we are in the cycle and what to expect next at the upcoming date.

Watch the video and please leave comments below. I'm curious to see what you think about this analysis in one of the methods and techniques are useful to you as you study and analyze the market you're Trading

 

 

A novel Ninjatrader Indicator for longer term swing trading Forex pairs, Futures, and Equities

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Good morning and thank you for using this website in researching how to trade the pairs or instruments that you're trading. Every so often we come across customers are looking to make investments that last longer than a few minutes or a few hours. These customers can best be described as swing Traders, looking for positions that last anywhere from 3 to 7 days or longer.

We've been developing Ninjatrader indicators now for close to 10 years, and over the course of our development of indicators for people using ninjatrader or tradestation we've come across several tools that have the ability to predict knows that last this duration of time into the future. One such indicator for ninjatrader is the Flux Daily Cycle Markers indicator. Listen to cater is unique, because it tells you days into the future when one of four phases is going to arrive in the market that you're trading. There are four phases in total two of which implied buying pressure in the market two of which imply selling pressure in the market. A paragraph

This particular Ninjatrader indicator is exciting for customers like the one mentioned in this video I'm about to post below because it provides a platform for building a discretion free trading system that is entirely rules-based with stocks that are known ahead of time and target's that are based on times in the future as opposed to fixed targets. Having a time based target, as opposed to a fixed target, in many cases provides a profit that can exceed traditional lagging trail stops, or fixed targets based on platform trail stops like Tradestation, or Ninjatrader indicators.

Watch the video, and then leave comment or email me to understand more about how you can use predictive indicators as opposed to lagging indicators in the future when looking to place longer-term swing trades.

Ninjatrader Indicators for studying Time-Price relationships

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Via NinjaTrader indicators, I've been studying timing pack patterns in the markets now for over 10 years. When I first started out I didn't truly understand how little I actually knew about how timing patterns worked and popular instruments like the Futures Forex and equities markets. One of the things that I couldn't possibly have understood in the very beginning was the interrelationship between time and price. I seem to have a handle on how the timing patterns worked, noticing how prices were going up and down at projected future times, but I really didn't understand how price was associated with those times and how those price levels of the key timing patterns became support and resistance in the market. I'd come across various articles over the years that tried to explain it, but always felt like they fell short:

http://www.futuresmag.com/2012/04/30/gann-square-outs-time-and-price-balance-markets

No one had ever really developed a Ninjatrader indicator to help with this study, either.

In this video, I spend some time discussing the six laws of time resistance that I've been able to discover and forward implement in markets the e-mini S&P and various Forex pairs. I'd like you to spend some time going through each of the rules with me, and see for yourself in this video demonstration how those rules apply in this peculiar permutation of time and price. As of 2017 we're starting to understand that the markets are not purely time, purely price, what are rather a resonant interdependence of the two. Each market has a resonant angle -  a hybrid of time and price. I'll use this ninjatrader indicator to demonstrate the hybrid resident angle in the e-mini and in particular I'll show how the six laws of time resistance are functional on both a horizontal plane, as well as this hybrid resident angle plane. This powerful ninjatrader indicator also allows me to Anchor the spring pattern of the e-mini, and you'll see for yourself how we're still looking upwards towards a reproach of the former high back towards 2400.

To view the class, simply follow this web link to our YouTube Channel:

The rise of the machines....Google enters the trading arena with it's proprietary TIME solution

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There has been a steady increase in the use of computing power to give the financial institutions an even stronger edge and strangle hold over how markets are traded, and dominated by the one percent of wealth controllers in the world. With regards to how computers and developments like artificial intelligence are affecting how these institutional edges are growing, we have no farther to look than which technologies are being funded by the largest wealth holders.

One of the most advanced trading technology companies was recently pushed on to the world stage, when whistleblower Eric Snowden mentioned a company called "Palantir" in regards to his revelations that  US government agencies were leveraging techologies at the bleeding edge to collect metadata on Americans using their phones domestically. A closer look at Palantir however shows us that finance, technology - and governments are becoming increasingly strange bedfellows.

In this article, Forbes talks about Palantir - a mega powerful software package - and who is using it:"

"Well, for starters, one of the world’s largest hedge funds, with also one the most sophisticated quant teams, is an outspoken user of Metropolis - the new name for Palantir Finance....In financial analysis, Palantir Metropolis can provide the big-picture, collaborative structure, which allows sophisticated users to target their advanced quant deep dives more effectively."

The future of trading it seems, is no longer a mastery of technical indicators - the type of revolution we saw in the 90's and early 2000's. Now - it's about who controls the data.

Google - is now making it's global network of connected computer infrastructure available to financial institutions, in part because it has a unique and unparalleled ability to sync it's data around the world - to the same time - using GPS satellites. Listen to how important TIME is to that ability, in this article:

"No one else has ever built a system like this. No one else has taken hold of time in the same way. And now Google is offering this technology to the rest of the world as a cloud computing service

Google believes this can provide some added leverage in its battle with Microsoft and Amazon for supremacy in the increasingly important cloud computing market, just because Spanner is unique. And some agree. “If they offer it, people will want it, and people will use it,” says Peter Bailis, an assistant professor of computer science at Stanford University who specializes in massively distributed software systems."

They go on to tell us:

"The volume of data—and velocity with which that data is coming at us—is amplifying significantly,” says JDA group vice president John Sarvari.

Spanner could also be useful in the financial markets, allowing big banks to more efficiently track and synchronize trades happening across the planet. And Google says it’s already in talks with large financial institutions about this kind of thing. Traditionally, many banks were wary of handling trades in the cloud for reasons of security and privacy. But those attitudes are softening. A few years ago, Spanner was something only Google needed. Now, Google is banking on change.

It seems traders who are relying on the same paradigm of lagging technical indicators - beholden to the traditional regime of "trading room gurus" have ever increasing competition with an ever dwindling edge pool. Once Google unleashes the power of it's "Spanner" infrastructure - traders who are not using leading data mining indicators like the FLUX system of Ninjatrader indicators will find themselves at a severe disadvantage.

 

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

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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.  

Predictive indicators for NinjaTrader using data mining

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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.

The best free Ninjatrader Indicators I've ever used

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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!  

1 NinjaTrader Strategy you wouldn't think would work

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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 strategiesAs 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.    

Gann trading without the college courses

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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.