Connecting Key Timing Moments

[Shaun Downey 10]

Connecting key Timing moments

 

Any trader will know that without correct timing the best placed plans can lie in ruins. However, you will often read that many professionals will state that if there trade doesn’t develop quickly they will exit. In truth there are asking a great deal of themselves, as who is any trader to say that as soon as a they buy or sell the market will move there way. Exit too soon and the trend could develop once you exit, stay too long and then your stop is hit. John Sweeney’s excellent book Maximum Adverse Excursion looks at this subject in detail and enables traders who are systematic to accurately compute at which point a trade must go against you, before the chances of that trade becoming a winner are remote. Once you know that you can then analyze the length of time a trade should be given before risk increases to unacceptable levels. However, for the more touch trader it requires detailed logs and access to back data to even begin to look at what works.

 

Therefore, looking to see if exact timing points can be created (beyond such things as cycle or Gann type analysis, which often give too wide a timing window to be of use to many traders), is one way of getting timing right. One such method is the movement of price too, or the changing of value of what’s called control. This is the point of most time in any trend including the current one and the previous. Two such Timing patterns have connected together in both the S*P and Gold this week.

 

First to Gold which has seen a rally that earlier in the week finally went to the control of the previous trend dating back to June last year at 900 (see Fig 1). Reactions can be expected 80% of the time on the first visit, but it is subsequent visits that can become more problematic. The key to gold’s next move came when the S*P rallied into Wednesday and Gold dropped. The common pattern of the last few months has been the opposite. Therefore gold had switched its allegiance and was simply rotating back down from a powerful resistance. Confirmation of this switch came as the Wednesday saw the S*P also hit is control (see Fig 2). The reaction was a day delayed but the fall created the desired affect on gold as it rallied directly back to control.

 

Fig 1. Price comes up to control on Gold

 

 

Figure 2. The S* P does the same 3 days later.

 

 

Friday has seen a gap higher in the pit hours of Gold and while it remains above 900 the outlook is bullish. Conversely the S* P below 866 maintains the pressure there as well. Next week we will be looking at control shifts and how they can time trades.

 

If you have any comments or questions they can be posted on the I-Traders comment section within the Blog page or on the forum of Traders laboratory.

[Soultrader 12]

Hi Shaun, thanks for the post. Could you inform us the timespan of your composite profiles? Do you have certain rules to plot the composite profile charts? Thanks.

[Shaun Downey 10]

Hi Shaun, thanks for the post. Could you inform us the timespan of your composite profiles? Do you have certain rules to plot the composite profile charts? Thanks.

 

The rules are generally fixed.

 

Reistances are taken from the previous trend and the distribution begins at that point until a major low is made. Then supports come from current trend as seen on the daily chart. It is normally at least 5 days before you know a new trend has started. Short term traders can have an extra distribution that reflects the previous 5 days only. This is because short term traders cannot remember further back. It would be vice versa if the current trend is down.