Pinning Down The Embedded Features

(…for the overbought side as it stands currently…)

It’s gonna be a long one, so grab a cup of tea!

Step 1. Identify the embedded overbought condition

I handed out the free tool for this one (instrument independent) in Aleš’s Lessons #10 under the name of Comfort Levels 4H Lucid and marked up the back test of the overbought neckline on the image above. The Blue, 80% line has not been seen back since – this is the realm of the overbought safety where higher highs are more or less guaranteed.

The first tail spin happened after a 585 pips relentless run up measured from the back test of the neck line and was 213 or so pips long (green).

The run up had a total of four, 4H exhaustion beats or 3 break outs. Not gonna confuse you with break beats, don’t worry.

2. Exhaustions

Any energy sequence could come to a halt after a beat: no interest in continuation would result in not breaking the beat. Let’s see if we can define a maximum duration for a break to must happen.

The first exhaustion – shown by the Choppiness_DV plots had 3 consecutive beats and the break of the beat happened 20×4 hours after the exhaustion and in a rather volatile manner.

Conclusions here: the break out is not very clean with multiple kick backs reaching up to 66 pips. The optimum way of playing is to have a holding and scale out on a beat. Reload below two 4-Hour lower lows – see brown box. Your optimal get out has to do with the count: you want to be active from count 8.

The second exhaustion had its beat 6 bars later and the break out was 12x 4 Hours down the road – with not much kick back this time. Interestingly the 8-count fell on the 3rd exhaustion print, which was also a beat. That’s two scores for the 8-count.

There were no 2x 4H lower low entries here, but the break itself was a safe adding point say 6-9 pips out.

From the 3rd exhaustion the count does not seem to get the exit right with the number 8, but it does get something else right: the number 7 count provides you with the stop loss values for the parabolic ending (lowest low of 6/7 gives the actual number). So, 1.1828 would had been your trail stop stop out if you did not want to scale out upon seeing the green circle event – the engulfing candle that was brought on by the 4th exhaustion.

The #1 counts were great entries, but you would not have these printed real time for you need 2 more candles before a candle can be called a fractal. For quick trades, you have the 7-count real time, and you can sell off on the 8-12 counts.

The last exhaustion was also a beat, but I could not write one software for every possible occurrences: a higher high and a close back below is always a spark, and can always balloon into a rapid fire.

Before closing out the exhaustion/beat section, let’s acknowledge the fact that the tail spin ended in an exhaustion-beat which was not followed up by a break as well as the new run for the top resulted in another exhaustion beat.

Routine: Choppiness_DV

Since the whole thing looks like a ranging / consolidation are it is safe to think that if this was to continue, the most likely thing to print here is a bull flag, which would give a lower sightly low as the next low risk entry somewhere between 1.1694 and 1.1651 (overbought neckline currently).

Of course, the 2nd tail spin can also turn into something more.

3. Projected distance

Since the neck line back test, the projected distance values brought on turbulence and and you were always able to sell for a profit if you were starting to short 7-pips out and added to your short every 10 pips further out. Even the worst location did come into money by 27 pips at the end, and the most abuse to endure would had been a total of 77 pips on the first position.

Routine: Projected Distance 240

Currently there’s a projected distance value at 1.1707.

The 1.1648 has no extended line on the right and still registers (see short purple line on the right), because of the way I wrote the search. There was no low below and close below event. This may be a mistake or could be a benefit. It is interesting to note that the value itself at 1.1648 is awfully close to the previously mentioned 1.1651 overbought neckline.

4. The Overdrive

I have talked about the possibility that the overdrive lines on the 4H charts may end up looking rudimentary. The circled values sync up much better on a 15-min chart, see the previous posts.

Routine: Overdrive / 2Fractals 15-min

The point here is that if the price reacts on cue to these hourly E-32 displacements, they verify the presence of the E-32 channel.

ODU[i]=E32L[i]+FMax*22*Point;
ODD[i]=E32L[i]-FMax*22*Point;

If these points coincide with exhaustions, your narrative have more evidence to work with to vindicate a turn.

The current touch did not come on an exhaustion-beat, so I am expecting more downside.

5. “It’s all about the RSI”

The latest addition, the plot of below 16 RSI 2 readings can help figure the tail spins / deep corrections. See my last article, “How Did I Know” for this one.

Routine: RSI2 Basic

  if (RSI2[i]<16 && iClose(symbol,1440,1)> iHigh(NULL,240,iHighest(NULL, 240, MODE_HIGH, 1590))-(iHigh(NULL,240,iHighest(NULL, 240, MODE_HIGH, 1590))-iLow(NULL,240,iLowest(NULL, 240, MODE_LOW, 1590)))*.2 
         && iClose(symbol,1440,2)> iHigh(NULL,240,iHighest(NULL, 240, MODE_HIGH, 1590))-(iHigh(NULL,240,iHighest(NULL, 240, MODE_HIGH, 1590))-iLow(NULL,240,iLowest(NULL, 240, MODE_LOW, 1590)))*.2 
         && iClose(symbol,1440,3)> iHigh(NULL,240,iHighest(NULL, 240, MODE_HIGH, 1590))-(iHigh(NULL,240,iHighest(NULL, 240, MODE_HIGH, 1590))-iLow(NULL,240,iLowest(NULL, 240, MODE_LOW, 1590)))*.2 
      ){
         ObjectCreate("TitusOverOne"+DoubleToStr(i), OBJ_TEXT, indicator_window, Time[i], RSI2[i]+16);  
         if (RSI2[i+2]<16 && RSI2[i+1]<16 && RSI2[i]<16) ObjectSetText("TitusOverOne"+DoubleToStr(i), DoubleToStr(NormalizeDouble(RSI2[i],1),1), 13, "Arial", Magenta); 
         else ObjectSetText("TitusOverOne"+DoubleToStr(i), DoubleToStr(NormalizeDouble(RSI2[i],1),1), 13, "Arial", Crimson); 

How Did I Know?

Why did I post these images saying that this was the starting of a leg down?

  1. The new consolidation level of 1.1849 was crossed over down and since this level printed, price never made it to overbought.

2. Look at that RSI2 sequence of two red numbers and two magenta ones.

This meant 4 hours of heavy selling, which is the move that starts off new a leg down. The previous, 200-pips selling looked like this:

Two red numbers followed by two magentas (end of leg A) – and at the end two red numbers followed by two magentas (end of leg C). The B-s and green verticals had to be ignored in between.

These plots are now part of the RSI2 Basic’s behaviour under embedded overbought conditions.

Furthermore, when I knew that the unemployment numbers were coming out at 13:30 local time, and the 4th number was printing, the danger was ending the sequence. So I was buying.

Yet, the buying aborted the ending sequence so I knew that I had to sell everything off before the hour ended. Since I was already short, I didn’t go short again – but I could have added some, for sure. Others may not have the same indicators, but they are looking at the same clock.

There was also the fact that the Green River gave support two times already – see earlier, so the third time had to be the charm.

If you look back at the last orange image, we have maximum 2 more hours left from the selling, and the clock is about to roll in 2 minutes. I’m looking to see 2 magenta numbers next – two hourly RSI2 HL2 readings below 16. If this hour ends up being up, we’ll get a fresh count, and so the selling shall continue until it manages to fetch itself a symmetrical ending – or bumps its nose into the overdrive line – darn it, it just did!

The first oversold is a buy for a squaring back to the oversold neckline – see the cover level of 1.1765 in brackets.

The second oversold is not a buy until below the projected distance the move generated – currently at 1.1749, and the last consolidation level was at 1.17348

Today you are good till 1.1744 and perhaps change.

Aleš’s Lessons #11 – Overdrive

The overdrive lines come with the 2Fractals_15min routine.

They are the red on the top and the dark green on the bottom.

I figure them from the displacements of the hourly E-32: + – 2.2 x fluctuation maximum.

One interesting fact is that the 200-pip pullback from the top fizzled out at such a level (in a still embedded overbought market), and another interesting fact is that the current double top also coincided with the inability to shift buying into overdrive.

I have made an effort to plug in at least the values on the 4H chart. Think of it like a flexible channel.

Notice how the selling never got to an oversold level.

I would consider making plots, but I cannot add them to the existing routines, and they may end up being too coarse anyways because of the large pauses in data flow.

Back to the previous lesson, you can see how the theories worked in real time today, the 1st break above overbought was a sell starting 1.1819 from where the squaring went back to the overbought neckline.

The second move back above was not a sell as I said, and with this article you have a much clearer picture in your had about what the long exit would be: a failure at the overdrive level.

I was buying the keel-back, but should had set my mind on the overdrive instead of scaling out by 1.1840 – this is what bias does to you.

Picture shows the price bouncing off the Green River twice

Too Square to Roll With the Dice

Welcome to the Elon Gated Community. We are listening in on the conversation between two residents.

A.D. seems to have blown a fuse upon coming across an announcement.

A.D.: What does AI have to do with arbitrage trading?

B.C.: AI is a broad term and its usage in trading can be in different elements of trading. For e.g. using AI only for execution or using AI for creating strategies etc.

https://medium.com/invao/how-to-exploit-arbitrage-chains-using-ai-based-hft-algorithms-2c4beeb752de

B.C.: Also, the quantum of AI being used by any firm will vary. Some firms might be using just 5% AI contribution in their operations yet they can claim their’s is a AI based solution. Also, we do not know for any firm whether using AI will pay-off over a longer period of time. Having said all this, AI/ML has lots of good stuff which can be used in trading.

(make note how quantum here stands for “degree”, “percentage” but boy, does not it sound 10,000 times more scientific?!)

A.D.: Arbitrage utilizes price difference. There are two variables and a comparison. Nothing artificial to be learnt there. Arbitrage finds speed advantage and or price advantage. In stock market terms this exploits the inefficiencies that may exist among the 13 US exchanges price quoting.
They also call arbitrage trading when two supposedly similar securities or commodities go in opposite direction and you make a bet that they would equalize aka pairs trading.

B.C.: Yes, AI can be used for this or in the execution side. you can many methods how ML/AI can be used in arbitrage.

https://towardsdatascience.com/a-gentle-implementation-of-reinforcement-learning-in-pairs-trading-6cdf8533bced

B.C.: Currently I am not focusing on ML in trading. My focus is on NLP (which again uses Deep neural nets) and strategies using technical indicators. At the end of the day to achieve success you need (1) a market expert (2) an ML expert (3) both should trust each other and hopefully get something good out of their efforts …Lol

A.D.: Still not sure why any of this is called AI. There isn’t even a hint of intelligence alien to human thinking, that cannot be comprehended.

A.D.: And what is the machine learning? Does it start to write programs of its own without human interception? I doubt it. Storing things is pure memory. Making things fast and often is high frequency.
I don’t get the French attitude of having to invent new terminology for things that already have a name.

B.C.: What is ML? Take for example there are 4 series — 1 dependent series and 3 independent. ML determines which is the appropriate equation that binds dependent series with the 3 independent series.. To do so it makes use of past data ….

B.C.: How is dependent connected to independent… Linear / non-linearuadractic, ploynomial etc.. Different ML algorithms help find this relationship. either through supervised or unsupervised learning.

B.C.: Some ML are useful in finding patterns… (e.g. patterns in stock charts) If ML can do this …why the need for a technical analysts to find head & shoulders, divergence !! Some ML are used to fool market participants in trading.. mostly used to fool retail traders who end up bad execution of traders…

B.C.: Some advance ML type like reinforcement learning… start operating on their own without human intervention are they have learnt sufficient well… Lol Basically, humans will become more and more absolute in coming years.. Good that you are in this century…

A.D.: I am already obsolete

B.C.: You will have to keep yourself updated mate.. you are multi-talented… so take some more effort and stay updated

A.D.: All is needed to put you and your machine learning ai algos out of business for good to change something in the order execution without telling you about it. Automatization in trading is doomed. *

B.C.: yes, that’s what I meant try to dupe retail traders. But in this case, even the manual traders will get duped. Can’t help.. manipulation is everywhere.. you need to choose the right race to run … Lol

B.C.: Hence, my focus is now more on Macros in forex.

B.C.: You need to know all this mate

A.D.: And all you need to know about fundamental trading is this: fundamentally everyone is trying to make money.

Hi you have called Reneissance I mean, Gothic Trading. We are a somewhat automated service. How may I conduct your call?

……

*: how can someone who identifies on his LinkedIn profile as Automated Trading Developer say a comment like that?

Achilles Dent, aka Macdulio automates certain trading elements to decrease / eliminate risk (promotion of free trade) and to optimize the exits of trading positions, but he does not advocate automated naked opens.

Hedging, trail stops, croppers, target adjusters are what he specializes in and uses them as tools to make human trading a little bit more sigh-borg like.

– Sigh –

“Sigh your name across my heart” – Terence Trent Dolby

Aleš’s Lessons #10 – Embedded Overbought

The embedded overbought market is making closes above the lucid 80% comfort level (blue).

This has clearly been the case for a while now.

Comfort Levels 4H Lucid

During overbought safety every lower continuation divergence is a buy.

The RSI2 Basic routine can plot for you specific continuation divergences that can tell you below which point you should buy. I also included the RSI2 2 and 98 squares in an extra LG version.

The whole wave structure was built on an RSI2 “2” reading. After that no RSI2 low came this low, so it was free accumulation below the continuation divergences and the RSI2 lows got lower and lower, and here is an RSI2 “2” again. Certainly, it is a buy, but this time not for a holding, only for a trade up, for this is not a root up this high in the air. This RSI2 “2” is a first leg down.

The exits shall remain the Extension fills and /or Mac Counts starting an “8” on the 4-hour chart.

As for the question, how can there be two End of Wave 3 signals and consecutive beat triangles?

The first “3” was the end of wave 3 of Wave 3, followed by wave 4 down.

The second “3” was the end of Wave 3 followed by Wave 4 down.

Remember what I said in the previous lesson about Wave 5 achieving similar degree of stretch as wave 3 of Wave 3?

Wave 5 was a rising wedge. 1.1907 was the extension.

Aleš’s Lessons 9 – New Wave

A wave structure should be visible on the 4H chart.

A new wave structure starts from the other side of Mr. Maroon – which usually coincides with E96.

Wave 3 starts when Wave 2 ends. Wave 2 makes a visible bend on the 9-sample stochastic, and likely takes it to an oversold level. As you can see, there is a counter move in there somewhere before the last push down (Wave C) which ends with an RSI2 reversal divergence.

You can see the corrective nature of Wave 2 down – an ABC move down.

Wave 3 ends with an extension fill and does it so with an 8 or larger DeMac count. In this current example during the earlier batch all outstanding extensions got their fill by count 12.

The following 8 -batch had no ambitions going after the last extension, and so the high of the 8th got never exceeded. (Choppiness DV shows this high as an exhaustion & a beat.)

As you can see, price is now in a Wave 4 down (tattackhe 2nd attack on the oversold since the New Wave root), yet again with this schizophrenic motion of going in two directions seemingly at once.

Wave 4 would make a shot over the bow: it would likely go more oversold than Wave 2 got to – since Wave to failed at E32 (yellow), Wave 4 is expected to get further, to E-67: a near miss of Mr. Maroon is very likely in the low one-sixteens, before Wave 5 up would kick in.

I managed to suppress the urge to post some Duran-Duran here. Props for me!

This move, that showed no follow through upon crossing over the consolidation mean at 1.1735 is expected to fail before reaching overbought, possibly around the f. 1.1791 level.

The extension is a stone throw away at 1.1827… I know, this is exciting.

The moral of the story is the divergence in price progression and distance from the mean:

The take away is that the wave 4 we saw was the wave 4 of Wave 3, not yet “the” Wave 4.

Not being able to reach the extrnsion levrl at 1.1827 is a valuable piece of information about the weakness.

Now there are 3 continuation divergences that can be knocked down like dominos which would provide clearance for the price to get back to the mean.

Wave 5 may go as far as reaching a similar degree stretch from the mean as wave 3 of Wave 3 achieved.

Videos I Came Across

This is not bad from an amateur

he has small mistakes like calling the 5-year and 10-year note a bond, talking about US second wave when it is still the first, but he makes an attempt at the wave structure and finds relevant news very well

This guy charges $7,500 per DVD
absolute scammer pretending to have made millions
& poor losers don’t even realize that they are the ones buying him the cars

Don’t forget to not learn any of his pseudo scientific crap such as “the stock is panicking”.

Anyone referring to Timothy Skyes as a mentor defines themselves as a scammer. I love the video where they sit next to each other and Skyes claims to have made 3k the other day and Duxi multiplies down with a false claim of 18x that money, putting the iconic scammer to shame.

Skyes also have sat down with Samuel Leach, and they looked terrific together. Scammers, unite!

There is stuff to learn here, but what he does not factor in is his cost of maintenance on holding triple leveraged ETF

I want alpha, I diversify, I want some serious gains – says Desmond, the DJ.
If you want serious gains, you invest in the right things and don’t diversify.
Check out Charlie Munger’s holdings. Berkshire, chinese etf and Costco.

Desmond made 17% gains with his “algorithm” which is a screen plot made out of indicators in the last month.
I don’t have any algorithms, I have a market model and inability to hold and currently at 84% gains hoping for 100% by Aug.

Desmond is an amateur and shall always remain so.

Got no video for this one (only a short one as part of the article), but decided on adding it anyways

this guy made $28 million with spoofing – and blew it all, never spent time and now does honorary work for the FED

https://www.bbc.co.uk/news/business-51286623

Aleš’s Lessons #8 – Choppiness Mac

Lesson 1:

The first overbought / oversold move would fail back to at least the overbought / oversold neckline, this is why the bracketed numbers are on the screen: they tell you to start fading (on the first break into the overbought / oversold) there and add to your position every 10 or so pips knowing that price would retrace to the neckline where you should be squaring.

You should not fade the second breaks.

Lesson 2: the follow though. The letter f & number is the maximum distance the failed move may be able to reach without crossing over a consolidation mean one more time.

Wherever there is a cross over, you will see a “+” or a “-“. The follow through would be ticked if the next 4-hour print achieves 50% extra distance beyond the length of the 4H bar that crossed over the mean.

F would thus stand for conditional failure and is a warning not to hope for any more gains barring a fresh reload at the mean.

I hope this clarifies things a bit. I believe that this market model covers more plausible market types than any other.

the best entry signals were hands down the continuation divergences

The 4 Consolidation – Questions

The last bottom was this.

Once you have the consolidation mean figured, you can start gauging better what is happening.

  1. Where is oversold? Where is overbought?

Does price get overbought / oversold?

2. Was there a break out or a break-out-failure?

3. If there was a break, has there been a back test? Was it successful?

(you get to label up the arrows)

Look at how the consolidation mean migrated lower and started providing support before the long trip up.

Now look at how during the Wave 3 up price never got oversold.

The consolidation mean migrated higher to provide a resistance.

4. Has the consolidation mean migrated up and started acting as resistance or has it migrated down and started acting as support?

During the sideways motion the consolidation mean migrated lower until

  • the market did not reach oversold any more (but it did touch overbought – your hint)
  • support was built around it for the next leg up

Your questions are the same as always.

  1. Where is oversold? Where is overbought?

2. Was there a break out or a break-failure?

3. If there was a break, has there been a back test?

4. Has the consolidation mean migrated up and started acting as resistance or has it migrated down and started acting as support?

Choppiness – Mac is available if you care to make a donation of your choice.

Contact me, Macdulio@yahoo.com

R1 S1

On the trading floor back in 2014 I remember how puzzled I was over these s1,s2,s3 “statistical” support and resistance plots on my neighbor’s screen. I was always sceptical of the one size fits all solutions.

6 years later I feel like I am the only person in the world that can figure an R1 and an S1 accurately.

See, there is no instrument independent calculation. The measuring points for the upside never coincide with the downside’s, they are not opens or closes, they have nothing to do with trading sessions, trading ranges, so not even ATR.

How can you get all of the above wrong and arrive at the right conclusion?

I posted this image the other day.

What followed was a dip to 1.12625 and a rally to 1.1352. How does this relate to my S1 and R1 calculations? You tell me.

Why should it had been obvious to take this long side trade?

You still had a Cat. A buy signal in effect.

Play long above…

And the Cat. B buy was valid till 1.1243

Therefore your entry risk at S1 was low, 20 pips or so, and the probability of hitting R1 was high.

As for R2 and S1 I don’t think that a single line could be defined, so ignore them for now.

As for the measuring points, just remember this: they are the ending fractals of a continuation divergence.

   j2=1;   while (j2<500 ){    j=j2+3;       if (iFractals(Symbol(),0,MODE_LOWER,j2))          while (j<j2+16){               if (RSI2[j2]<RSI2[j] && iFractals(Symbol(),0,MODE_LOWER,j)   ) break;       //&& Low[j2]>=Low[j]+10*Point                j++;}                      if (iFractals(Symbol(),0,MODE_LOWER,j) && RSI2[j2]<RSI2[j] && Low[j2]>=Low[j]-10*Point ) break;        //&& Low[j2]>=Low[j]-10*Point          j2++;}  if (j2<500 && Low[j2]>=Low[j]-10*Point) {LowFractalTime_2=iTime(NULL, 0,j2);    LowFractalTime_1=iTime(NULL, 0,j);    } if (j<500 && j<j2+16)   {ObjectDelete(0,"BUNA3_2");     ObjectCreate(0,"BUNA3_2",OBJ_TREND,0,LowFractalTime_1,Low[j],LowFractalTime_2,Low[j2]);    ObjectSetInteger(0,"BUNA3_2",OBJPROP_RAY_RIGHT,false);         if (iLow(symbol,0,iLowest(symbol,0,MODE_LOW,j2-1,0))<Low[j2])    ObjectSet("BUNA3_2",OBJPROP_COLOR,clrNONE);        else          ObjectSet("BUNA3_2",OBJPROP_COLOR,indicator_color9);         ObjectSet("BUNA3_2",OBJPROP_WIDTH, linethickness);           ///first lower continuation divergence                         if (Period()==60){            ObjectCreate("BUNA3_3ffx",OBJ_TEXT, 0, Time[j2+3], Low[j2]+20*Point);          ObjectSetText("BUNA3_3ffx", " ("+DoubleToStr(NormalizeDouble(Low[j2],4),4)+") Short:"+DoubleToStr(NormalizeDouble(Low[j2]+90*Point,4),4), 17, "Impact", clrWhite);          ObjectCreate("BUNA3_3ff",OBJ_TEXT, 0, Time[j2+3], Low[j2]+20*Point);          ObjectSetText("BUNA3_3ff","("+DoubleToStr(NormalizeDouble(Low[j2],4),4)+") Short:"+DoubleToStr(NormalizeDouble(Low[j2]+90*Point,4),4), 17, "Impact", clrDarkRed);           if (iLow(symbol,0,iLowest(symbol,0,MODE_LOW,j2-1,0))<Low[j2])    ObjectSet("BUNA3_3ff",OBJPROP_COLOR,clrRed);                      if (j2>2) {             ObjectCreate("Ellipset"+DoubleToStr(j), OBJ_TRIANGLE, 0, Time[j2-3],  Low[j2]+90*Point, Time[j2-3], Low[j2]-420*Point, Time[j2], Low[j2]);             ObjectSet("Ellipset"+DoubleToStr(j),OBJPROP_COLOR,clrGray);             ObjectSet("Ellipset"+DoubleToStr(j),OBJPROP_BACK,0);             ObjectSet("Ellipset"+DoubleToStr(j),OBJPROP_WIDTH,1);             ObjectSet("Ellipset"+DoubleToStr(j),OBJPROP_STYLE,1);                    ObjectCreate("Ellipse3_3ffx",OBJ_TEXT, 0, Time[j2-3], Low[j2]-400*Point);            ObjectSetText("Ellipse3_3ffx", " S1:"+DoubleToStr(NormalizeDouble(Low[j2]-420*Point,4),4), 17, "Impact", clrWhite);             ObjectCreate("Ellipse3_3ffy",OBJ_TEXT, 0, Time[j2-3], Low[j2]-400*Point);            ObjectSetText("Ellipse3_3ffy", "S1:"+DoubleToStr(NormalizeDouble(Low[j2]-420*Point,4),4), 17, "Impact", clrBlue);