Unveiling the Future:Leveraging Historical Patterns and Modern Computers for Predictive Insights
The study of history has always provided valuable insights into the present and future. In the realm of finance, historical patterns serve as a treasure trove of information for predicting future market trends. With the advent of modern computers and advanced data analysis techniques, harnessing the power of historical patterns has reached new heights. In this blog post, we will explore how historical patterns, in combination with modern computing capabilities, can be leveraged to make accurate predictions about the future of financial markets.
Big Data and Machine Learning
Modern computers equipped with powerful processors and vast storage capabilities enable the analysis of massive amounts of data. By applying machine learning algorithms to historical market data, computers can identify intricate patterns that may go unnoticed by human analysts. These algorithms can uncover complex relationships, correlations, and non-linear trends, empowering investors to make more precise predictions and informed investment decisions.
Algorithmic Trading
Algorithmic trading relies on sophisticated computer programs that automatically execute trades based on predefined rules and strategies. These algorithms can incorporate historical patterns, technical indicators, and market data to generate buy and sell signals with minimal human intervention. By leveraging the computational power of modern computers, algorithmic trading systems can identify and act upon market patterns in real-time, potentially capitalizing on fleeting opportunities.
High-Frequency Trading
High-frequency trading (HFT) utilizes ultra-fast computers and advanced algorithms to execute trades within fractions of a second. These systems can analyze historical patterns and real-time market data simultaneously, enabling traders to capitalize on short-term price discrepancies and exploit market inefficiencies. By leveraging the speed and computational capabilities of modern computers, HFT firms aim to gain a competitive edge in predicting and reacting to market movements.
Data Visualization and Pattern Recognition
Modern computers enable the visualization of complex data sets, allowing analysts to identify patterns visually. Data visualization tools can plot historical market data, overlay technical indicators, and display patterns such as support and resistance levels or trend lines. These visual representations enhance the human ability to recognize and interpret patterns, supporting decision-making processes and enabling investors to anticipate future market trends.
Conclusion
Combining historical patterns with modern computing capabilities revolutionizes the way we predict financial markets. The immense processing power, machine learning algorithms, algorithmic trading systems, and data visualization tools available today empower investors and analysts to uncover hidden patterns, make accurate predictions, and capitalize on market opportunities. However, it is important to remember that human judgment and expertise are still essential in interpreting the insights provided by computers. The symbiotic relationship between historical patterns and modern computers holds immense potential for navigating the dynamic landscape of finance and unlocking the future of market prediction.
Interviewer: Good afternoon, Mr. Gann. Thank you for taking the time to speak with us today.
W.D. Gann: It's my pleasure. Thank you for having me. This is a nice change up for me, actually.
Interviewer: How's that?
W.D. Gann: There's no Wall St. in heaven, and I miss the markets a little, to be honest. I like talking about them to other people.
Interviewer: Happy to provide a change of pace for you. Can you tell us a little about your family and how they supported your interest in trading?
W.D. Gann: Certainly. My father was a farmer, but he also had an interest in the markets, and he encouraged me to pursue my own interest in trading. My mother was also very supportive and instilled in me a strong work ethic and determination to succeed.
Interviewer: Mr. Gann, can you tell us what life was like for you as a young boy?
W.D. Gann: Certainly. As I said, I grew up on a farm in Texas, and as a young boy, I was responsible for helping out with the chores and working in the fields. It was a hard life, but it taught me the value of hard work and perseverance. Despite our rural surroundings, my parents placed a high value on education, and they encouraged me to read and learn as much as possible. I spent many hours reading books on a variety of subjects, including science, mathematics, and history. These early experiences had a profound impact on my later life and career.
Interviewer: Mr. Gann, can you tell us what life was like in the town you grew up in?
W.D. Gann: Sure. I grew up in a small town in Texas - Lufkin - and life there was very different from what it is today. It was a close-knit community, and everyone knew each other. People worked hard to make a living, and there was a strong sense of self-reliance and independence. I remember spending many hours working on our family farm and helping out our neighbors. We didn't have many of the conveniences that we take for granted today, such as electricity or indoor plumbing, but we made do with what we had. Despite the challenges, it was a wonderful place to grow up, and I'm grateful for the lessons and values that I learned there.
Interviewer: That's interesting. How did you develop your interest in the markets?
W.D. Gann: I became interested in the markets after working as a telegraph operator for several years. I was fascinated by the fluctuations in market prices and the ways in which various factors could influence those prices. I spent countless hours studying and analyzing market trends, and eventually developed my own unique approach to trading.
Interviewer: Ever take time to settle down and start a family in-between all those books?
W.D. Gann: (laughs) Yes, I actually came out of the library into the sunshine from time to time. Long enough to get married in fact.
Interviewer: Yes, I was going to ask you about that. Can you tell us a little about your wife, Nora?
W.D. Gann: Yes, I married Nora in 1902, and she was a wonderful wife and mother to our six children. Nora was a strong and supportive partner in my work, and she played an important role in my success as a trader. She helped me with my research and analysis, and she encouraged me to continue pursuing my interest in the markets even when times were tough.
Interviewer: Can you tell us more about your children?
W.D. Gann: Certainly. We had four daughters and two sons. My children were a great source of joy and inspiration to me. I encouraged them to pursue their own interests and passions, just as my parents had encouraged me. While none of my children became traders like me, they all went on to successful careers in various fields.
Interviewer: It's wonderful to hear about the support of your family. Can you tell us how they influenced your work as a trader?
W.D. Gann: My family was a constant source of inspiration to me. They encouraged me to pursue my dreams and to never give up, even when things got tough. They also played an active role in my work as a trader. My wife, Nora, was a trusted partner who helped me with my research and analysis. My children were also interested in my work and often asked me questions about the markets. Their support and encouragement helped me to stay focused and motivated throughout my career.
Interviewer: Tell me a little about your siblings. Big family?
W.D. Gann: By your standards, absolutely. I had three brothers, and two sisters, who were quite a handful for my parents. One of my brothers - John - he left the farm and became a successful businessman and actually helped me with my trading career by providing financial support in my early days.
Interviewer: How important was the support from John?
W.D. Gann: It was tremendous - and a huge blessing. During my early days, John's backing allowed me to trade more capital than I could have otherwise, which allowed me to take bigger risks and build my working capital up exponentially faster. John believed in me, and was proud of my accomplishments later as I refined my techniques.
Interviewer: Can you tell us more about your trading strategies?
W.D. Gann: My approach to trading is based on a combination of fundamental and technical analysis. I studied market cycles, price movements, and other factors that can influence the market. I also relied heavily on astrology and numerology to predict future market movements. But it's important to note that I didn't rely on these methods alone. I combined them with rigorous analysis of market data and trends.
Interviewer: You mentioned using astrology and numerology to predict market movements. Can you tell us more about how you used time and vibration in your trading?
W.D. Gann: Yes, time and vibration were key elements of my approach to trading. I believed that everything in the universe, including the markets, followed certain natural cycles and patterns. By understanding these cycles and patterns, I could make more accurate predictions about future market movements. I used various techniques, such as calculating price and time targets based on geometric patterns, to identify these cycles and patterns.
Interviewer: That's fascinating. Can you give us an example of how you used these techniques in a trade?
W.D. Gann: Sure. In one trade, I used a technique known as the "Square of Nine" to calculate price and time targets for a particular market. Based on my analysis, I predicted that the market would reach a certain price level on a specific date. When that date arrived, the market did indeed reach that price level, and I was able to make a significant profit.
Interviewer: Mr. Gann, your trading techniques were quite unique and unconventional for your time. Astrology. Predictions. Geometric patterns. How did people react to them when you first introduced them?
W.D. Gann: Well, when I first began using my techniques, many people were skeptical. They thought that my approach was too complex and esoteric, and they didn't believe that it could produce consistent profits in the markets. However, over time, as I began to share my ideas and techniques with others, more and more people began to see the value in what I was doing. Eventually, I gained a reputation as one of the most successful traders of my time, and my methods became widely respected and imitated.
Even today, many traders continue to study and use my techniques in their own trading. Many still don't believe that time predictions can work though, something I've been observing from up here. It's disheartening.
Interviewer: Meaning?
W.D. Gann: I'm was always fascinated how complicated people made their trading decisions because they didn't believe the markets were predictive. After I was interviewed for the Ticker and Investment Digest - and they reported on my trades - people still didn't believe markets were predictive. Apparently that still holds true today. My friend Richard Wyckoff said that people don't like 'thought and research'...hated it, in fact. I can see how my techniques might intimidate them based on his assessment. It requires a little extra analysis. A leap of faith, if you will.
Interviewer: Interesting. What advice would you give to new traders today?
W.D. Gann: My advice would be to never stop learning. The markets are always changing, and it's important to stay up to date on the latest trends and developments. It's also crucial to develop a solid trading strategy and stick to it, even in the face of adversity. And to study Vibrational law, and the cycles of the markets. It's all based on Nature and Natural Law - which never changes.
Interviewer: Thank you for your time and insights, Mr. Gann. It's been a pleasure speaking with you.
W.D. Gann, also known as William Delbert Gann, was a financial trader, analyst and author who lived in the early 20th century. He is widely considered to be one of the most successful traders of his time, and his methods and theories are still studied and used by traders today.
Gann's primary focus was on market forecasting using geometric angles and time cycles. He believed that the movements of financial markets could be predicted using mathematical and geometric principles. He developed a number of techniques for analyzing charts, including the use of angles, which he believed revealed the underlying trend of the market. He also used time cycles to predict market turning points, and believed that certain dates were more significant than others in the market's movements.
Gann also placed a strong emphasis on the importance of understanding the fundamentals of the markets, and believed that a trader should have a deep understanding of the underlying economic and political factors that drive market movements. He believed that the most important factors in determining market movements were supply and demand, interest rates, and the overall state of the economy.
One of Gann's most famous contributions to trading analysis is the "Square of Nine," also known as the "Square of 144." This is a geometric chart that Gann developed, which he believed could be used to predict market movements. The chart is based on the number 9, which Gann believed had special significance in the markets. He believed that the Square of Nine could be used to identify key levels of support and resistance in the markets, and that it could be used to predict market turning points.
Gann's methods and theories were not without controversy, and some traders and analysts have criticized them for being overly complex and difficult to apply in practice. However, many traders still find value in his work, and Gann's methods continue to be studied and used by traders and analysts today.
Gann's work has also influenced many other traders and analysts in the field, including Ralph Elliott, who developed the Elliott wave theory, which is based on the idea that market movements are fractal and repetitive in nature. Gann's work also influenced other trading gurus like R.N. Elliott, and W.D Gann's work is considered as a foundation of the technical analysis.
In conclusion, W.D. Gann was a pioneering trader, analyst, and author of the 20th century whose methods and theories are still studied and used by traders today. His focus on market forecasting using geometric angles, time cycles and understanding the fundamentals of the markets, has been a great contribution to the field of trading analysis. Despite some criticism, Gann's work continues to be studied and used by traders and analysts today and his work has also influenced many other traders and analysts in the field.
Traders, whether they are trading stocks, currencies, or any other financial instruments, must learn to control their emotions if they want to be successful. This is because emotions can often cloud judgment and lead to poor decision making, which can be costly in the fast-paced world of trading.
One way for traders to control their emotions is through the use of risk management techniques. This includes setting clear and defined risk limits for each trade, as well as having a solid trading plan in place that outlines the steps to be taken in various market conditions. By having a plan and sticking to it, traders can remove some of the emotional decision making from the equation and rely on a more systematic approach. We're amazed, after being in business for over 13 years. When we ask people to show us a copy of their trading plan, on average fewer than 5% of people we meet who describe themselves as day traders have an actual physical written out trading plan with any type of a statistical edge. Most people are 'shooting from the hip' and basing trades on 'in the moment' decisions that fail quite often.
Another way to control emotions is through mindfulness and self-awareness. Traders should take the time to recognize and understand their own emotions and how they may be affecting their decision making. This can be done through mindfulness practices such as meditation, which can help traders gain clarity and focus, as well as through self-reflection and journaling. We have many customers who will actually monitor their emotions and ask themselves each day before they trade 'how do I feel?' They measure themselves objectively (physically and mentally) and rate their wellbeing. If they are less than a 7, they will only trade in SIM that day. They build in this emotional/physical 'circuit breaker' to make sure they're only trading when they are mentally optimal, and not prone to self sabotage that day.
Traders should also be aware of their own biases and try to avoid letting them influence their trades. This includes avoiding overconfidence, which can lead to overtrading, as well as avoiding the sunk cost fallacy, which is the tendency to continue investing in a losing trade in the hopes of recouping losses. Instead, traders should focus on the potential future returns of a trade rather than the past performance or emotions associated with it.
It is also important for traders to remember that they cannot control the market, and it is important to accept this reality. Trying to fight the market or hold onto a losing trade can lead to emotional decision making and ultimately result in further losses. Instead, traders should focus on controlling their own actions and making decisions based on logical analysis and their trading plan. One of the reasons we developed our predictive software - was based completely on this idea. By understanding that markets had an element of institutional 'manipulation', we are able to study what is likely to happen in the future, versus fighting the market and trading it the way we would like it to go.
To further control their emotions, traders can also seek the support of a mentor or a trading community. Having someone to discuss trades and strategies with can help traders gain perspective and avoid making emotional decisions in the heat of the moment. It can also be helpful to have a support network of fellow traders who can provide guidance and encouragement.
In summary, controlling emotions is crucial for traders in order to make sound and profitable decisions. This can be achieved through risk management techniques, mindfulness and self-awareness, avoiding biases, accepting market realities, and seeking support from mentors or trading communities. By learning to control their emotions, traders can improve their chances of success in the fast-paced and often volatile world of trading.
There are several reasons why most retail traders lose money in the stock market. One of the main reasons is that many retail traders do not have a good understanding of the markets and how they work. They may lack the knowledge, experience, and discipline needed to make informed trading decisions. This can lead them to make costly mistakes, such as buying or selling at the wrong time or investing in risky assets.
Another reason why many retail traders lose money is that they often trade on emotions, rather than following a disciplined trading strategy. This can cause them to make impulsive decisions that are not based on solid analysis, which can result in significant losses. One of the most powerful resources for many of our customers in this area, has been a book written by trading psychologist, Mark Douglas. In his book, "Trading in the Zone", Douglas forces traders to closely examine this psychological element of their trading. Many of our customers read his book once a quarter as to remind themselves that trading is really a numbers game - exploiting a statistically relevant edge over time.
Furthermore, the stock market can be unpredictable, and even the most experienced traders can sometimes make mistakes or encounter unexpected events that result in losses. This is why it is important for retail traders to carefully manage their risks and not invest more money than they can afford to lose.
Overall, the combination of a lack of knowledge and experience, emotional trading, and the inherent unpredictability of the stock market can make it difficult for retail traders to consistently make profitable trades. We believe our predictive indicators for futures, forex, and equities traders can assist with many of these problems early on - giving traders a psychological edge with simple rules based systems with signals they know are coming in the future which reduces psychological anxiety.
Contact us today if you'd like more information about our 4.9 star rated software and training programs.
The Emini Dow Jones gave us the possibility to get exposed to the 30 of the largest companies in the U.S. Representing a portion of the standard Dow Jones Industrial Average futures, these E-mini products allow us to short the index without stock loans or variable fees.
The Emini Dow Jones is one of my favorites in the future market because of its predictable behavior. Using the predictive software “WARP” in one minute chart, I enjoy my first 1 or 2 hours of trading because the patterns based on time that the software gave me in advance are really accurate.
Today in the New York session, at the opening, we have the retail sales report and the industrial production report. I check my calendar expecting that the volatility increases in those periods of time.
The first buying trade is shown at 8:39, the candle closes over the 120 EMA, I prefer that the candle close above the 120 EMA but is a valid trade, after that you can close the trade at 8:48 am.
A Candle closed above the 120 EMA with a timestamp under it it’s a buy pattern. A Candle closed below the 120 EMA with a timestamp above it it’s a sell pattern.
The second trade is another technique called crossover and is activated when the candle crosses below the 120 EMA at 8:50 am. You open the sell entry and hold it until 9:06 am. That was a great trade. Notice that the trade occurs during the news, but with the Warp predictive software, the entry and the exit of the trade were known 2 days ago.
The third trade is another sell pattern from 9:12 am until 9:24 am with a positive result. The last, the fourth one, is another sell trade with a stop out.
There you have it. 1.5 hours of trading with 4 trades. 3 trades won and 1 lost.
One of the advantages of using Warp predictive software is that the dots are always there when the time has gone. If you want to study a past trade day you can do it, also in replay mode in Ninjatrader 8. This is a good technique to understand the patterns and correlation between them and the price market. The behavior of the candles and their closed position when a dot is above or below that event
Here is my chart, I Have the Emini Nasdaq 100 in 3 minutes. You can make the same analysis in any timeframe because Warp predictive software is based on time, and we just follow some rules and watch the timestamp that appears with the dot. The chart below explains the moment of the entry and the exact time of the exit following one simple rule:
Watch the price if is above or below the 120 EMA, when a dot appears open a trade when the candle is closed and close the trade in the next timestamp when the time expires.
These basic rules have more than the 60% of probability in a standard setup. Based on the volatility the risk for each trade for the Nasdaq could be between 30 to 50 ticks per trade.
These are the results of 1 hour of trading
The trade 1: +28 Ticks
The trade 2: +79,25 Ticks
The trade 3: -27,25 Ticks
The trade 4: +20,25 Ticks
Total of ticks: + 107,Ticks
107 Potential Ticks in 1 hour of trading make the difference!
When you understand these concepts, your trading starts to be consistent in time. And this is just 1 rule.
Sometimes before the New York session, you can find good entries. Using Warp predictive software always is easy to find the correct areas where the market could give you good profits. Always study and know the market you trade, not all the instruments have the same behavior.
One of my favorites is the Dow Jones, I trade the instrument 3 years ago daily, and today I validate a 5 minute entry. I wait until the candle closes under the 120 EMA.
I open a trade with 4 contracts with a sell limit order. That means that after the big blue candle closes, I put the sell order limit at 50% of it. I want that the price reaches my limit order in a pullback. Note that my stop loss is above the candle that crosses the 120 ema 20 minutes before.
I cover my 2 first positions and move my stop loss at the point of break even. My idea is to hold my positions until the next timestamp. (8:35 am), or reach the orange dotted line, that I identify as a big support. You can include any technique to warp software! I like price action.
In a big movement during the opening New York session my level was reached, and closed my last two positions.
I closed the day with $670, almost before the opening, that its ok for me
We end the year and have started the first week of the Year.
When I use my predictive software called Warp, y also like to check the global news just to expect more volatility at those times. Take note that a lot of traders are out resting, and you could expect lower movements. But I always came back after my vacation, and I like to trade this week.
I trade the New York Session. And today I trade the Emini Nasdaq following 2 simple rules:
Sell if a red dot appears after 8:30 am and the price is under the 120 EMA and
Close the trade in the next green timestamp when the time expires
I use 4 contracts to open the trade, and I like to take partial profits with my first 2 contracts, the third one is a 1:2 profit risk-reward ratio if possible. The third one I like to run and see how far it could go. At 8:39 I open my trade and wait. My stop loss is on the red line defined by the 8:39 timestamp.
The first 2 contracts were covered
I move my stop loss at the point of break-even + 2 ticks
And start to draw in my chart the reversal point line. It helps me to remind me that above that point the trade could have space to “breath” and could end the movement
When I see the big candle, I move the stop loss at the middle of it
The price came back and close my trade. I think I move it too earlier
You can see that at 8:57 am the time expires, and the closed candle was near the same level where the price stops me out. You could hold the 4 contracts at 8:57 am time stamp, that’s your decision, I like to split the contracts, and cover them partially.
When you choose an instrument to trade using warp predictive software you have the capability to adjust different parameters to achieve the best setup of your preference. Warp predictive software has a manual who describes different patterns to execute approved entries and how to define that setup. The chart you see below is the Bitcoin in 1 minute and I follow the rules described in that manual. Warp is a time-based software, so, we use time expiration what it means the candle is closed when you take actions.
The first entry move appears when the price “puncture” down the green line at 8:31 timestamp, the SL is above that candle 1 tick, and you can:
Take profits 1:1 or 2:1 or
Wait and hold the position until 9:03 am and close all your positions
The second trade is at 9:03 am, the SL is above that candle 1 tick, and you can:
Take partial profits 1:1 or 2:1 or 3:1 or
Wait and hold the position until 9:19 am and close all your positions
The Entry number 3 is at 9:33 am, the SL is above that candle 1 tick, and you can:
Take partial profits 1:1 or 2:1 or 3:1 or
Wait and hold the position until 10:22 am and close all your positions
I like to take partial profits its my personal style of trading, but with WARP you have the confidence to hold the positions until the time expires in the next timestamp. It’s up to you to define your risk management in your style of trading.
