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Thursday, December 1, 2016


“When time critical problems demand time critical solutions!”

How many times can you cut increments of time in half before you can't slice them anymore? How many times can you cut the time between changes in the bid/offer of USDJPY and still tell me whether or not the market is rising or falling? At the top or the bottom of a move, at the very second nobody ever sees a change in trend coming, what’s the smallest amount of time you have to make a buy/sell decision that is most profitable to you?

Only the first question can be answered with certainty; the smallest unit of time = approximately 5.391 * 10 (-44) power in seconds. This is known as the Planck Constant. It is the unit of time it takes a particle travelling at the speed of light to go a “Planck length”. A Planck length = approximately 1.616 * 10 (-35) power meters. This length is the smallest length that can be used in modern particle accelerators without creating “black holes” that grow bigger with higher energies. And we all know what a growing black hole would mean now don’t we? If in fact you could measure smaller times, nothing in the universe could change; it couldn’t be measured because nothing is faster than the speed of light. Bottom line is the universe is digital and discontinuous.

The other questions are trading related and also discontinuous in nature and are non-computable to boot; what happens at tops/bottoms between bid/offer changes can’t be measured. In essence you’re faced with a probabilistic nightmare where the continuation of a near term bull/bear market is both P(0) [no chance] & P(1) [certainty] at the same time; trying to draw inferences from lagging technical indicators is like driving a car using the rear view mirror. Everything is fine as long as you don’t have any curves in the road; not so great in the mountains on curves though!

One big problem, of course, is that we all have so much information hitting us every second with millions of market participants making all kinds of diverse decisions regarding buy/sell, that there is no humanely possible way for you to consistently figure it all out on the fly. If you can’t objectively see this, go lie down until you do!

Much like particle physicists who study the unseen, we as traders are as blind as they are when it comes to markets; all of us [professionals included] at some point have opinions, unfounded bias, gut feelings, intuitions, a “sixth sense”, and then go our merry way while we totally ignore the “stone cold” very hard math that pointed in the other direction. Newbies especially, shrug it off to “inexperience”, bad luck, the house screwed me, or anything else they can think of to repress the fact that the math was/is/always will be right and should be followed. Let’s face it shall we; we live in a “Schrodinger’s Cat” world. Deal with it cuz it’s the reality we can’t escape even if we wanted to.

[Note: To the uninitiated, “Schrodinger’s Cat” is the thought experiment of a cat in a box; is the cat alive or dead? Answer: he is both! The state of the cat is a probability “wave function” Ψ where he is both alive and dead until observed by opening the box. At that instant the wave function of one collapses to “0” and other instantly becomes “1”.] 

And so, when I say “just follow directions”, what you are really doing is suspending reality in your head to believe in the math very few of you understand or appreciate; not that this is bad, just that, ladies & gentlemen it is a very, very hard thing to do! Because what you are asking yourself to do has no basis of understanding in the real world outside of trading. So, to have “faith” and risk real money is a very real problem people face when they download my algorithm and implement the rules and set about to make some money; you’re taking a sacred object … your hard earned money … and at the “drop of a hat” cuz you found me on the internet and I’m a professional trader with “street creds”, you all of a sudden will simply ‘follow the rules” and then make a fortune? … Do I look stupid? … you do realize it took me about 90 days to follow my own original floor trading algorithm after I created it “back in the day” cuz I didn’t want to believe it?

My point is simply this: prove it to yourself on a demo account for a few weeks and see the results once you read the manual and tutorial; I can sit here and tell you anything/everything until Jesus comes back, but it won’t mean nearly as much as you seeing for yourself. The good news? Well, it’s simply this: pretty much none of you really know [or care] the quantum mechanics, computational analysis, Boolean Algebra, and information theory behind how computers and your “smart phone” work. I would bet money most of you wouldn’t believe it; yet, you use them everyday with software that makes them functional to your world. In the same way, trading is just as complicated, and I’ve taken all the fuzzy theoretical math and packaged it into the MT4 so everything is “visual” in form and literally nothing has to be “thought about” while you are trading. Seconds matter in this business, and make no mistake about it, in USDJPY you are “bumping heads” with the biggest and most “sharp pencils” in the world; you don’t have time to stop and think about anything. Your only choice is to react.

I’m not asking you to “understand” the math of the algorithm; vector fields and the nature of “systems” [the M1 signals], the concept of exhaustion [acceleration], or discontinuous mathematical functions [changes in short term market momentum with “state 0” in price that can switch in an instant to “state 1” in price at different levels]; what I am asking is “acceptance”. And how can I possibly drive you to this location? By asking you to demo the USDJPY volatility algorithm first, before using real money in a live account; make all of your mistakes here Newbies cuz it costs you nothing but bestows upon you wisdom.

Now, I may have been born at night, but I wasn’t born last night, and the turnip truck didn’t drop me off at a computer terminal with a sign on it that said “Trade & make easy money!” on it; I know that in order to “get something” from trading I have to “give up something” in return. So, what are the major limitations of using discontinuous functions as a road map for short term momentum? In essence there are 2; 1) by putting into the volatility algorithm a rule that says no USDJPY trading for the day [start GMT = 0; the start of the Asian session] until the HVALUE [(high for day – open for the day) OR (low for the day – open for the day) EXCEEDS 40 PIPS, I eliminate most of the chop; what I give up are profits in this zone from the signals when there is no trading, and 2) by introducing a complex dynamic variable into the mix there must be negative unintended consequences, that by there very nature and definition I am not aware. 

However, since this is trading, I care only about price action that theoretically can hurt me; everything else would be either neutral or positive. I can only visualize 3 scenarios under which my trading would be negatively affected; one is present in all systems or methods and therefore I gain or lose nothing, the second comes immediately before/after major new events like NFP Friday and/or interest rate decisions and we avoid those anyway, and the third has never happened in the history of trading in any market, so until it manifests itself why worry about it? So, while there are theoretical tradeoffs, the practical reality is the positives win in a landslide!

Sure, I think it’s a “breeze” following the algorithm in USDJPY; hang around it a week or two [tops] and you’ll see that even “Butch” [seen below in our official company photograph], my personal security expert and long time bodyguard loves it as well. And when he’s not hitting people, he uses it to make money. [Remember, he used to trade oil and wore cowboy boots and a big black hat to impress the ladies in 6th grade, but now he “sees the light” and some day can protect the Mrs. Watanabe’s of the world and teach them Yen trading … Ohhh, what a glorious future!]

Turning to the gold trade today … “OMG!! … Get in there and sell, sell, and sell some more Mortimer! … the Chuckleheads puked on the China open with a lower RM=2 exhaustion hit taking gold about $10 lower in 3 minutes … Seems the Chinese are “concerned” that commodities speculation on the nations futures exchange has exploded to record levels and they announced “curbs” [read margin hikes] to “softly dampen” the excesses [“Bwaaa hahahahaha! How about getting the price monkey hammered to let Chinese firms make some Yuan at their customers expense so part of it can be kicked back upstairs to corrupt ChiCom officials in government?] … “Well, you know what this means.” … “I got a buck here Randolph that says New York eventually goes higher today!”

Well, they didn’t wait much for New York now did they? … market rallied almost $15 after the “puke panic” in Asia, but don’t expect the bullion banks to take this lying down and not see it as anything but an opportunity to sell … here near the New York open, gold looks and feels soft … hard for me to see where the buying will come from today to lift prices of any significance … with US bond yields spiking higher, the Dollar Index at near multi-decade highs, and the very real threat of Italy going “Trump” on Sunday night, where does gold get its “oomph!” to snuff out the bullion banks selling?

Trade #1 from today directly below.

About a buck and a half in this, but gold right now can’t sustain rallies; period. And up and until it can, while I may risk slight profits in a trade, after I’m up over a Dollar an Oz., I’m not gonna be put in the position of watching it turn into a loser either … so, while it may yet rally some more, the day is young and there will be other signals yet to come [maybe].

An hour into this, and I think I’d rather be clipping the bearded lady’s whiskers at the circus … I hope you can see from the M1, rallies just can’t be sustained … we get these one or two minute wonders up, and as soon as the short covering is over, there stand the bullion banks to sell it lower. However, probably sooner rather than later, the Dollar stumbles some, USDJPY falls hard on sell stops, and gold stages a “rip your face off rally” that catches the major shorts and we get a day that’s about $25 - $30 up in no time flat.

But we ain’t there yet, and my “buy appetite” when I’m long this stuff [until it changes] is on “DEFCON 1”; meaning, my finger to liquidate is awfully quick when I see weakness of any kind. With the weakness I’m seeing as I write in gold, I’d rather be trading USDJPY.

I’m outta here to the beach … until tomorrow.

Have a great day everybody!




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