EXHAUSTION MOVE ANALYSIS

“Nothing you can dream up will ever be as good as the ‘volatility algorithms’ exhaustion lines at predicting short term tops & bottoms!”


With nothing going on, except a little Japan, Inc. repatriation of funds back into the homeland for year end accounting purposes [and a nice sympathy rally in gold [“about time!”] as the US Dollar is thus slightly weaker], and the obligatory fund managers “window dressing” portfolios in the stock indices to show stocks that are up for the year in their funds, it shouldn’t surprise anybody that very little trading is happening anywhere.


Which gives me the chance to bring up the year end archival charts I’ll be adding to the “Download Links” section of the website, most likely on Saturday; I’ve finished USDJPY, spot gold [XAUUSD], and the DOW30 is almost done. I touched on this yesterday, but it is important you understand what is at “your fingertips”; back when I was on the trading floor, information like this would have taken 5 years of human man hours to compile and publish; today, less than 2 weeks.

Essentially, this is a library of RM=1 through RM=4 of M1 exhaustion moves in 3 markets that are equal to or greater than 9 minutes length of time. Gold has been cataloged for June – December 2016 [calendar Q3 & Q4 of 2016]; USDJPY & DOW30 has been cataloged for October – December 2016 [calendar Q4 of 2016]. All the charts contain appropriate ‘Square of Nine’ cycle information of the length of the duration of the move in minutes, and the move in price, and these 2 values are compared against the ‘Square of Nine’ parameters of Gann’s “squaring of time & price” along the key cell numbers on the Cardinal & Diagonal crosses. In addition to the individual charts, each market also has a comprehensive spreadsheet which has all the information over the year; this is a great way to quickly scan which charts you may want to view.

Directly below is a Gann ‘Square of Nine’; notice the first 8 numbers. They are all on the Cardinal or Diagonal crosses, so for analysis purposes, if I am trying to show that exhaustions moves are not random in nature and are in fact based on cycle “tops & bottoms”, what good is it to have anything below 9 minutes for time when every number from 1 to 8 is on a Cardinal or Diagonal cross cell number?
 
 

Starting at cell 9, cell numbers quickly expand outward, thus making moves that are higher in time a function of probability [cell numbers for time on the Cardinal & Diagonal Crosses versus those that aren’t], rather than certainty which we see with cell numbers 1 through 8, and this is the reason I have excluded them for analysis; it doesn’t mean they are any less valid, in terms of making money on them and liquidating positions, it simply means I don’t want to “skew” the data with “slam dunks” that have total certainty of being on the Cardinal or Diagonal cross cell numbers. In essence, I’m taking away data that makes my premise of cycles that are constantly present in the market and only shows data that has a probability of being “off” the algorithm’s predicted model data.

The key parameter regarding price also can be seen in the market spreadsheets for each market; that parameter is the “collective error” over time of price ± from the closest Diagonal or Cardinal cross cell number. Any single trade can be slightly over or under the exact Cardinal or Diagonal cell numbers, but if there is any real bias in the algorithm model, it will show up over time as the collective error grows and grows through the weeks and months of data. Well, as you will see when the data is posted and published, the “collective error” in each market is so low, the median regression line for hundreds of data sets in each market is directly on the Cardinal or Diagonal cross cell numbers; just as Gann predicted they would be for most markets some 100+ years ago.

There are literally hundreds of charts for you to look at, so what is the main point I want you to pick up on? Simply, from either a top or bottom [white arrow on the chart] to an exhaustion move end [orange arrow on the chart], notice how close the plum line slope changes from either the top or bottom; simply put, they are the vast majority of the time very close to each other. So, every time we take a position on a plum line slope change, we are putting ourselves into a situation that has the very real potential of becoming an exhaustion move to the aqua and red lines, and that means making some very nice profits.

Gann’s ‘Square of Nine’ is a wonderful tool for spotting cycles in hindsight; it is utterly worthless for predictive power because you can always move either price or time out another level to new cell values. What I have done is simply recognize that every “spike” in price [up or down] is to a degree an exhaustion move, and therefore I wish to eliminate the smaller ones from analysis and concentrate on levels that start with Risk Model [RM] = 1 [normal market mode] and move upwards towards RM=4 [psychotic mode], and at the other end of the volatility spectrum ignore the “one offs” that happen every generation or so [like the ’87 crash, etc.]. By examining market history closely, because it is all we have, I can set up a statistical model showing me what amount of moves take place over time, and have repeated so often it makes your mind go numb, and then plot those values against the ‘Square of Nine’; and presto! Bingo!… when you do that you see tops and bottoms “cluster” around the Cardinal & Diagonal cell values.

Learn the computer code and plug into it the cell numbers for exhaustion, and you basically have the volatility algorithms. And if you spend some time analyzing the data I have collected and present to you, you might just soil yourself when you realize just how accurate this has been over the last decades of trading. I seriously don’t think there is anything even remotely close of “getting you in at the bottom”, and then liquidating “at or near a short term top”; rinse, repeat, and find your “escape to success”.

Yes, I see gold made a nice move today … woulda coulda shoulda … don’t really care though, as I’m looking forward to next week and have already “closed the books” on 2016. The beach beckons … I’m outta here … until tomorrow.

Have a great day everybody!

-vegas

OPEN A DEMO AND/OR LIVE ACCOUNT [CHOOSE THE “ZERO ACCOUNT”; REFERENCE ID# 6952 WHEN OPENING YOUR ACCOUNT] AT THE LMFX LINK IN THE “DOWNLOAD LINKS” SECTION OF THE WEBSITE TITLED “OPEN TRADING ACCOUNT – DO IT NOW!”

TUTORIAL IS FINISHED & POSTED!

Crowds everywhere celebrate the release of the “Tutorial”!!

And you thought I only lounge around in my gym shorts all weekend and get nothing done … not so … I lounge around in my gym shorts all day every day and pretty much avoid getting anything done! … but, I was a busy little beaver this weekend getting the tutorial finished and linked up to the website last night. [For you Obama voters who need a little help this early in morning (it’s 11 A.M.), the tutorial file is available for viewing online or download over in the “Download Links” section of the website in the right hand column (no, your other right hand).]

I want to highlight 2 key criteria from the tutorial; 1) the algorithm was created and “flows backward” from the exhaustion lines to the rules & trading signals on the M1, and 2) the largest stumbling block I had to overcome in developing the algorithm was giving up my “hope” that I could somehow predict exhaustion moves, and moved away from that to realize what is more important is to simply put yourself in a position to capture “all exhaustion moves” by defining every M1 as “an exhaustion move”, thereby allowing us to identify the “precedents” in the market that must happen first before you see any upper exhaustion move. In other words, it’s all about “OPPORTUNITY” , and the fact that since we can’t predict with any accuracy, it’s more important to “be there” when the conditions [aka trade signals] are right and simply wait for it to happen and capture it.

You don’t have to be able to “predict”, you just have to be smart enough to put yourself in a long position via the trading signals that in every instance give a buy signal before an upper exhaustion move occurs; by doing this simple task, by default you will capture any exhaustion move and thereby defeat the necessity of playing [and losing] the prediction game! It sounds simple enough on its face, but believe me, it took me a very long time to see this “trading truth” and give up wanting to be able to “predict” and call myself a trading genius; “I’d rather be stupid and rich, thank you.”

You’ll notice also from the “Download Links” that the title of the tutorial has the DOW30 in it; that’s because I finally realized when writing that all 4 of the markets we have volatility algorithms for have the same theoretical constructs as gold; it’s simply the different “personalities” of each market that are the reasons they have different trading rules & signal parameters. The philosophy & logic of the algorithm’s main premise, the actual math behind it all, and Gann’s ‘Square of Nine’ all are the common threads that are present in each market’s volatility algorithm; so why have a separate tutorial for each when there is so much redundant material in all of them. So, if you trade crude oil for example, simply “swap out” gold and think crude oil when reading; same for the other markets as well.

Now that I have the tutorial finished, in a few days I’ll have the DOW30 done as well and posted up for viewing and/or download. As always, I support what I write, and if you have any questions/comments about the tutorial, I’d love to hear ‘em from you.

And before I forget, you people unfortunately stuck in the mainland U.S. are now back on “regular” time, as Daylight Savings Time is over; great news for me, because down here in Paradise none of the Caribbean islands ever need to make time compensations during the year for sunlight, so New York is now 1 hour behind me. That means, of course, I get to start my day 1 hour later, and it also means the start time for gold on the MT4 has changed with ASSETS FX server time changing to 13:00 from 12:00, and LMFX staying the same at 15:00 server time.

“Ahhh, what a great time of year for those of you in the mainland U.S. … this is the time of year I start to watch the weather channel at night so I can get some giggles thinking about “wind chills” over about 80% of the country. Enjoy the 4:45 P.M. sunsets!”

Turning to gold today … now you know why we never take positions home over the weekend … you just have no idea what’s going to “pop” when you are playing at the beach for a couple of days. Exit Question: “How many FBI, DOJ, or other asshats in government knew about this before markets closed on Friday and positioned themselves accordingly for the Sunday open for some, quick, easy bucks through their offshore accounts somewhere?” I’d love to know. [“And believe me, they ALL have offshore accounts.”]

Here near the open, gold feels soft, even with the bloodbath lower opening from last night … today’s trade is either going to be “balls to the wall” volatility or “dead in the water” I wish I’d stayed in bed. I don’t see a lot of middle ground here going into tomorrow’s election. We’ll know soon enough … an hour into this and I think I’ll clip my nails … some equities strength early after the NYSE open sending the DOW30 right up to the RM=1 exhaustion line … chart of this directly below, and once again the exhaustion lines prove magical!

As would be expected, correlated weakness in gold, but so far nothing to buy… I’d be surprised if the bullion banks & dealers didn’t do some retail spec sell stop hunting down here … first trade of the day directly below.

What you need to recognize here and remember are 3 criteria of prime importance; 1) the price is below the daily calculated white horizontal line, and this move can be described as a “waterfall” that didn’t hit the exhaustion lines, 2) having said that, and getting long once the next M1 goes green [which it did right away], the whole point of this trade is to catch the move back up in a very short time frame and then liquidate it back to the dealer LP at a higher price because we are below the white line. These types of trades must have the obligatory “short leash” on them because probability wise what we are playing is the “pop”, and 3) you can’t care [when you liquidate] what happens to price; maybe it goes higher, but from where I’m sittin’ it looks like it is stalling and can’t make any more headway and therefore needs to be liquidated. The trade made a few pennies per Oz. but that isn’t the point … concentrate on the trade and the algorithm rules, not the money!

And, an hour later here we are hitting marginal new lows, while the SP500 is taking weekend shorts to the woodshed. Equities were way oversold anyway coming into this week, and this Cankles bullshit where she isn’t guilty of a crime by head FBI professional asshat and part time rodeo clown Comey, just gave them the excuse last night to light the fuse for short covering. And today, those position players in equities on the short side saw their “risk exposure” blow up in their face as “gamma” went exponential and the risk-parity funds were forced to adjust. Any wonder why the guys managing $5 billion+ in hedge funds are taking early retirement and/or shutting the doors to their now defunct funds?

We now have about a $16 range for the day, and unless some other “news shoe” drops, I don’t see anything besides “chop city” dominating the market until tomorrow when big money will start shoving markets around as election results come in and somebody is forced to puke. Until then I don’t see the point of trading this stuff anymore today. Could be wrong … if I am I deal with the consequences of missing opportunity … that’s all.

Beach beckons … I’m outta here … Until tomorrow.

Have a great day everybody!

-vegas

OPEN A DEMO AND/OR LIVE ACCOUNT AT THE LMFX LINK IN THE “DOWNLOAD LINKS” SECTION OF THE WEBSITE TITLED “OPEN TRADING ACCOUNT – DO IT NOW!”

 

THE FIRST PIECES OF THE PUZZLE

“Hmmm, maybe I should just follow the algorithm instead of thinkin’ all the time… what has thinking got me so far?"

Last night, as I’m sure some of you have noticed, I added 2 files to the “Download Links” section of the website [right hand column for you “gifted” Cankles voters]; 1) “Gold Algorithm Exhaustion Charts June Thru Oct 2016”, and 2) “Gold Exhaustion Spreadsheet June – Oct 2016”. All of the exhaustion moves [9 minutes or longer in time] in gold, no matter the time of day are in this file; charts are catalogued by month. You can view any chart online, download any chart, month of charts, or the entire file of 174 exhaustion moves. Charts are labeled in shorthand to make it easy to find what you are looking for to download or view. For example, here is a chart in the AUGUST 2016 sub directory;

DOWN RM=1 1740 START 8_26_16

This was the down move in price that hit the exhaustion lines @ RM=1; the move started from a short term top @ 1740 LMFX server time; the move occurred on August 26, 2016.

The second item is the spreadsheet; here you get the numbers of all of the moves for handy reference, and any exhaustion move RM=2 or above is highlighted in red so you can easily spot bigger moves without hunting too hard.

For many of you, these 2 files are the first “pieces of the puzzle”, if you will, for you to see the power, simplicity, and visual nature of the volatility algorithm and just how easy it is to follow in visual form as the trading day goes by without any need to “do math”. All of the math has been “internalized” and works behind the scenes in the computer code, because when you get right down to it, we’re all like Jethro [below]when it comes to “cipherin’ & trading” at the same time.

“In the end, we’re all like this.”

In the coming days I’ll have the tutorial finished in gold and get it up in the “Download Links”; I intentionally released the charts & spreadsheet before the tutorial because I wanted you to see the absolute power behind the trades with your own eyes. More than likely, tonight I’ll have the October 2016 spreadsheet & charts for the DOW30 linked up as well; it’s every bit as good as gold, but remember it uses a different dynamic and has different rules than gold. DO NOT take the rules for gold and assume they will work for the DOW30; they will not and you will lose money.

Having said that, though, here are the 3 exhaustion moves in the DOW30 yesterday afternoon.

Now, I ask you; can you find for me any other technical indicator that models exhaustion behavior any better than the volatility algorithm?

Again, I release this before the manual & tutorial are finished and posted so you will look at the data and see for yourself the power of the volatility algorithm, before you just hunt for the rules so you can start trading. Remember the following:

READ. THINK. STUDY. ACT. PROSPER.

If you do this, and start on a demo platform with play money for a while to get familiar with the algorithm and the signals, and can actually see your account balance grow, then when you have convinced yourself it most definitely works, then you can come to the conclusion of my most recent protégé Christina; “Fuck yea it works! Gimme some of this money shit right now!!”

Everybody in life has talents that make them special; I’ve talked about Christina in the past, and she is one smart cookie. Not in the usual sense of “book smart” or “Ivy League” smart, or “hey, I got 3 college degrees so I’m smart!” She is “street smart” and once she digested the algorithm and the “lights went on upstairs”, her instincts and ability to follow the algorithm for profit are every bit as good as mine; some days, she even got slightly better fills than I did.

But here’s the thing; on paper, and if you judged her by some dumb ass resume, you wouldn’t hire her to mow your lawn. So, I don’t wanna hear from anybody, that some how some way, their circumstances in life are such that they have convinced themselves that they just don’t have what it takes to do this. My response to that is simple: “Bullshit.”

I will never forget the first day I showed her the MT4 with all the “gizmos” up and running, and she looked at me and said, “Are you fucking kidding me? This is Chinese; how the fuck am I gonna know all this shit!! Seriously man, are you sure you know what the fuck you’re doing?” Months later she’s a pro.

I put all of this information on the website for release, not to impress or try and make you think I’m some kind of “math whiz trader genius” type [“It’s time to vote boy … a Beggin’s Strip for a ‘yes he is a genius’; I just knew you would come around and see it my way!”]. I put this data “out there” so you can convince yourself it works and back up that claim with data. Some of you can trade without knowing what’s behind the algorithm, but I know most of you better than you know yourself; and that kind of guy/gal needs data and needs proof before they commit money to trading.

In essence, then, you now have 3 pieces [out of 4] to the volatility algorithm puzzle for gold; the only thing missing is the tutorial which will be up for download in a few days. Take the time to go over some of the charts and data and then ask yourself if you think all of this is somehow “just random” in nature and we’re all just “lucky as hell” to be on a winning streak, OR the algorithm absolutely “nails” exhaustion moves and gives us very high probability trades for entry? After 5 months; bull runs, bear runs, “chop city” days & weeks,  and 174 moves [more months to follow as they come and go and will be added to the database for analysis and viewing], the data and evidence from the charts is overwhelming. And I’m asking myself, “Where can an ordinary guy/gal go, who wants what I wanted many years ago, to get stuff like this and get on the right track to success, without laying out a fortune to those whose only purpose is to invade their wallet?”

Of course, the Mrs. thinks I’m the dumbest ass in the world for opening the vault to the public and not asking for a “pound of flesh”; but she is not a trader, she does not know what it is like to start in this business all alone and having no idea where or who to turn to. She could care less about trading; has no interest in it except to tell me, “show me the money bigshot!” And from that, all interest is lost.

Trust me, I’ve walked in all of you “Newbies” shoes, and up and until you get up that “learning curve”, this is as brutal a business as there is in the universe. And the cold brutal truth of the matter is, I do this because of my mentor Bert; his legacy and memory I honor because he didn’t have to do for me what he did, which was spend almost 3 years and thousands of hours teaching me the trading business and got absolutely nothing for it, or wanted from it, except for me to succeed. All of you are beneficiaries of his kindness and love of trading.

Turning to gold today … well, that escalated quickly into the 1290’s didn’t it … round up the usual suspects in Asia … bingo! … here we are in the 1290’s! … hmmm, new high for the day right at the open; not good, as with Asia rallying last night this looks like a “sucker” rally to pull traders in. I’m really not liking this kind of action, and of course today at 2 PM we get the FED decision on interest rates; nobody looking for a hike here, right before the election, but if they did gold will get absolutely “monkey hammered” lower given the recent runup. Make sure you are flat going into this; we trade, we don’t gamble.

More than likely gold will have some “profit taking” [in the immortal words of a talking head at CNBC] at the same time the DOW30 rallies; we’ll see, but it’s time to be “patient beat” 45 minutes into this so far.

Ok, a little SP500 strength was enough to get gold down a little and the first buy signal; the trade directly below.

If I wasn’t excited about being long in the 1280’s, how do you think I’m feeling about the mid 1290’s? Right, and it means on a move up I got a very fast trigger finger. At first, I thought it was going to be a loser trade, but it only went about 30-50 cents against me, not enough to hit my sell stop. On the way up, I’m mentally adjusting my sell stop, and when we got above 1298 my stop went to a bid on my screen of 1298.05; I see that, and I’m liquidating. Being near the top of the move and before it started to go lower, my liquidation fill was only a penny off at 1288.04; very acceptable.

Second trade on an algo buy signal directly below.

Sold this spike up very near the top after it backed off when the SP500 rallied off the low open spike down; like the first trade, I got a hair trigger here.

A little bit higher than a buck profit on this second trade bringing my total to just over $2 for both trades.

A few moments later another buy signal; third time’s the charm, right? Below trade #3.

Now this is what I’m lookin’ for; I’m out on the above average spike higher since the trade began on the first M1 that goes red. Ok, with these 3 trades, I now have about $4.50 in captured profits, and with the stops at 1300 taken out, I’m not looking to get back in this stuff today no matter where it goes. I can honestly tell you, I don’t want to be long up here; we’ve come too far too fast and I’m seriously worried about getting caught in a waterfall with a stop underneath.

A break is coming to buy that will be a damn good trade entry; I just don’t know from where, but I’m fairly certain it will be a lower exhaustion hit when we see it. Could come later today with the Fed, or could come tomorrow … but the action up here is “sloppy higher” … sooner rather than later the dealers & bullion banks are going to go for the “Johnny come lately” longs who have sell stops underneath this most recent climb … until we see that, I’m not going to go back into this stuff, and I don’t care where it goes.

And, we also just had 2 upper RM=1 exhaustion “hits” in the DOW30, which is the reason gold turned around and headed lower; THE DOW30 CHART DIRECTLY BELOW.

Can I get you out at the top from being long any better than this? Still think trading is “random”? Imagine me in a pit with 300 other traders, and I’m the only guy selling this top in size; think anybody notices? You’re damn right they do. “What’s your secret man, I gots to know!!”

Ok, I just closed the laptop for trading; it’s 10:30 AM here in Paradise, and the sun is shining and the beach awaits; the Mrs. is doing what the Mrs. does best which is spend money, the dog is going nuts cuz he sees the laptop get closed and is running around looking for his leash and beach toys. Me? I’m happy as hell I rang the register and now get to do what most of you only wish you could do at 10:30 AM; that’s right, go to the beach for some Vitamin C therapy, take in some sun & waves, watch the dog have fun chasing anybody with food, and realizing this is a great way to live! We’re soooooooo outta here … until tomorrow.

Have a great day everybody!

-vegas

OPEN A DEMO AND/OR LIVE ACCOUNT AT THE LMFX LINK IN THE “DOWNLOAD LINKS” SECTION OF THE WEBSITE TITLED “OPEN TRADING ACCOUNT – DO IT NOW!”

 

IDEAS ARE CAPITAL

“Honey, tell me again why you didn’t buy it here.”

Now that October is over, in the next few days I’ll be posting for download the 5 months from June 2016 – October 2016 gold exhaustion moves; every exhaustion move gold made [RM=1 -4], no matter the time of day, is captured with commentary on the M1 candlestick chart. [Note: exhaustion moves of less than 9 minutes are not in the data; I explain in the tutorial why this is the case, but the short version is that statistically, they could be viewed as a random sequence, so they are left out. It’s not that they are insignificant for trading purposes; quite the contrary, but from a probabilistic point of view one could make a valid case that exhaustion moves less than 9 minutes are random and just total luck. In order to knock down that argument those moves are simply left out of the data.]

In total, there were 174 exhaustion moves [9 minutes or greater in length] from RM=1 to RM=4 representing $1,573.94 PER Oz. Of these 174 exhaustion moves, from the very top/bottom to the end at the exhaustion lines, 91.4% [159/174] were EXACTLY EQUAL IN TIME [MINUTES] to cell numbers on either the Cardinal Cross or Diagonal Cross of Gann’s ‘Square of Nine’; the other 8.6% [15/174] were ± 1 minute from being exactly on the Cardinal Cross or Diagonal Cross. In total, there were 104 up exhaustion moves and 70 down exhaustion moves; RM=1 represented 84.5% of all moves [147/174], RM=2 represented 9.8% of all moves [17/174], there were no RM=3 moves, and RM=4 represented 5.7% of all moves [10/174].

Now, here’s the really important question to ask of the data; “what is the cumulative error rate in exact price for all the exhaustion moves that is away from the Cardinal Cross or Diagonal Cross? In other words, after 174 moves, what’s the total price missed by?”

THE TOTAL ERROR RATE = -$0.18

THAT’S RIGHT, after 174 moves the algorithm came up on the short side by 18 cents.

I will show in the tutorial why mathematically this is then almost impossible to be considered “random”; in other words, not only are cycles present, but the math behind the algorithm that you see on your screen models exhaustion behavior extremely well, thus giving us the very best liquidation and entry points [for down moves] you can ask for.

This might be a good time for that “Oh Shit” moment you’ve been dreaming about; oh, and one more thing. The data for the DOW30 looks every bit as good as the gold data; the cumulative error rate for the DOW30 [price] for the month of October was +2 DOW30 Index points with the total exhaustion point moves [in Index points] = 2,651!!

“Go ahead, tell me again how it’s random bullshit?”

Turning to gold today … well, somebody lit a fire under the price in Europe didn’t they? With the daily calculated white horizontal line way below the market here at the open, we should get a decent buy signal on the first bit of market sell off; question is, after that can it continue upward and give us some nice profits?

Well, that didn’t take long did it? Got the first buy signal a few minutes after the open after a failed attempt at a new high; got in a little early on the slope change because I saw the “engulfing pattern” at the bottom, and as we got closer to the end of the M1, I knew that in a few seconds when the new M1 would start that we would see a slope change in the plum line. However, I’m not at all excited about being long up here in the mid to upper 1280’s, so my “trigger finger” to liquidate is going to be rather fast; first sign of resistance on the M1 that goes red towards the last half of the M1 is going to see me liquidate. After commissions it yields about $1.25; skimpy, but better than nothing or a loss.The trade is directly below.

I’m reasonably sure will get some more downside to get me back in; moments later we get buy signal #2. And again, like the first trade, once we start moving up, I’m not only raising my “mental stop”, I’m also acutely aware of potential resistance lurking up here [read commercials bullion wall” of sell orders] to halt the rally; we need to liquidate before it turns around to ensure good liquidation fills, otherwise you know the drill. This trade captured about $1.50. Trade #2 directly below.

Ok, so I’m sittin’ here just a tad below my daily goal of $3; it’s going to take a decent sized sell off to get me back in, and quite frankly for a measly quarter, I’m not all that interested in giving anything back. Quite likely there will be more “buy signals” up here, but again I ask the question as we climb the price mountain again, “where’s it gonna go? Can we get above 1290 and stay there? That 'slaughter' in price on October 4^th has more than a few retail spec position players shaken; I don’t see them coming back in the market unless we get over 1300 and stay there; so that leaves the bullion banks & dealers, and once they cull the order books and see the bids 'drying up', I guarantee you they will “monkey hammer” the price once again." I’m not sayin’ it will be today, but I just don’t see prices steadily moving higher from here without some very quick sell offs, that if your long near the top, you’re going to get some algo signals that aren’t very friendly towards your position. One minute it looks good, the next not so much. Thanks, but no thanks.

The data I first presented in today’s blog should have all of you readers in giddy shock. I’m not trying to be overly dramatic here, but after having seen a massive rally in June, “chop” in July and August, a killer move lower in September, and then basically “chop” in October, gold has “shown its hand” in basically all market conditions. And through it all, the volatility algorithm pretty much “nailed” the short term trading tops & bottoms with an accuracy that should have the hair on your neck standing up; if it isn’t (and it’s just as good in the DOW30), then as a professional trader all I can say is 3 things; 1) “either you don’t give a shit about trading and making money”, 2) “you see no need to trade and improve your financial life because you are comfortable where you’re at”, or 3) “you don’t believe the data.”

To the first 2, I can’t help you, but as to the third, you got 174 gold charts at your disposal [here in a couple of days] cataloging every single exhaustion move 9 minutes in length or greater over 5 months in every type of market conditions; look at as many as you would like and pay close attention to where buy signals occur in relation to the bottom of the move; it should amaze you, and if it doesn’t it’s your problem not mine.

Ok, off to the beach with my BFF; his nurfball, bag of Beggin’ Strips, a nice big beach towel, fresh cold water in the cooler [with other assorted beverages for humans], and of course the beach umbrella for some shade. All in all, it should be a great afternoon … both of us are sooooo outta here … until tomorrow.

Have a great day everybody!

-vegas

OPEN A DEMO AND/OR LIVE ACCOUNT AT THE LMFX LINK IN THE “DOWNLOAD LINKS” SECTION OF THE WEBSITE TITLED “OPEN TRADING ACCOUNT – DO IT NOW!”

 
 

BINARY EVENTS IN TRADING

“… and so, the key elements of the algorithm are … hey, you in the back? … are you paying attention?”

It’s Friday, and I don’t want to get too technical today because … well, it’s Friday … and knowing humans like I do, a lot of you will have the attention span of a teenager in Algebra class at 2 P.M. on the day school breaks for the Christmas Holidays. [“Oh wait … I meant ‘Winter Celebration’ period … another micro-aggression against ‘Snowflakes’ … OMG, when will I ever learn?”]

But before you anxiously await the “Simpsons” marathon on the big flat screen [“got your gym trunks all laid out with a ‘fresh’ t-shirt for the weekend don’t ya?”] and at least one case of cold “Duff’s” begging to be popped open for the occasion, I want to explain 2 key features in trading that you need to be cognizant of for maximum success; 1) my proprietary “Time Theory”, and 2) “booking & keeping” profits for the trading day.

Both of these are “binary events”, and are not mutually exclusive of each other; in fact, the first plays right into the other. Together, if you heed what I’m writing, not only will your trading be successful, your emotions get kept in check as well, and you find yourself in “balance”. And I’m just here to tell you [“ignore me at your peril & misfortunes, because I know some of you have to learn the hard way as Mr. Market shoves his foot so far up your ass on an early Friday afternoon you feel your throat getting sore.”] that you need to pay attention to both; and while they technically fall outside the confines of the volatility algorithm while you’re trading it on the M1, in an indirect way the algorithm’s “profitable signal probabilities” are influenced by both binary events.

My “Time Theory”, which I developed many decades ago in the trading pits and is as relevant today as back then, is as follows:

G(X) = ΔP – ƩT

G(X) = probability of making money on trading day ‘X’; ΔP = the change in price (or intraday volatility) of the market you’re trading (the higher the better); and ƩT = the time already gone by for the trading day as the market moves ever forward to its close for the day or week.

Simply put, the probability of making money today is HIGHEST when you’re trading an above average volatile market and your trades are made during the ‘early’ part of the trading day. It should be intuitively obvious to you why this is the case; 1) if it’s a volatile market, it’s gonna move, and 2) if your trades are put on during the early part of the trading session, if you happen to have a losing trade, there is plenty of time to make other trades to get the loss back with an algo signal. “Whatcha gonna do at 2 PM on a Friday if you lose money on a trade in gold? Where do you think this stuff is headed into the ‘wee hours’ of the close’? You think anybody is still left at their screens to trade this stuff? Yea, you and the bullion bank … good luck with that.”

This leads directly into factor 2; “once you’ve made your profit goal for the day [in gold use Oz., not money], or you’re reasonably close to that goal ONCE A TRADE IS OVER [not during], you have to have the discipline to stop, book the profit, and give the “middle finger” to Mr. Market and the bullion banks who desperately want you to stay and continue to play.” In other words, you make money and you keep it … come back tomorrow and grow your account some more; remember, opportunity is infinite, capital is finite.”

For me personally, at present my profit goal in gold is about $3 per Oz.; if I make a trade [or series of trades] and find myself up $5 or more, if the markets are moving and daily ranges have been very good, I may in fact might make additional trades; however, and this is important, I won’t risk more than $2 per Oz. on these additional trades; I won’t go below my profit goal; I may give back “some extra” I earned earlier, but I won’t sacrifice any of my profit goal [once earned] under any circumstances.

Turning to today’s gold trade, at the open it’s ….. crickets. God, what a bucket of slop this has turned into lately. And to make matters worse, of course the Chuckleheads traders in Asia bid it higher last night before Europe took it away; it’s what they do 90% of the time. GDP at 8:30 … can this move the market, cuz I’m not feelin’ like a whole lot of people are interested in trading today; whatever happens, no positions into the report.

Well, that escalated quickly didn’t it. And like yesterday, “folks, I just can’t make this shit up!”. Today’s [most likely only] trade directly below.

I got in at the exhaustion line [1262.50] and out on the immediate spike up [1265.80]; went another Dollar higher, but who cares. All-in-all, after commissions about $3.20 something and change in profit on the exhaustion line buy. And for you Newbies out there wondering why such a quick turnaround on the liquidation; Easy Peezee, the market is below the daily calculated white horizontal line, which means on any waterfall [exhaustion or other], on the subsequent rally up you got to hit the liquidate button to get a decent fill from the LP, otherwise if you wait for the “turn” they will take their “pound of flesh” and fill you off the market. My liquidation fill on this today was right on the market; and I got this fill because it was going higher when I did it.

The market historical evidence is very clear in gold; over 90% of the time when price hits the RM=1 exhaustion lines, especially on a ‘waterfall’ spike down in price, you will get very quickly a rebound in price from those traders who are short and missed the opportunity to liquidate and are in fact panicking to buy and liquidate their position AND also those retail specs who missed the ‘bottom’ and now think they need to be long.

This buying, when price is below the calculated daily white horizontal line will not [probability wise] usually last very long; it is imperative you liquidate on the way UP, and not wait for the turn in price back down. It simply doesn’t matter if it goes higher from your liquidation; when it turns it can be ugly, and you don’t want to have to be selling [liquidating] in a falling market now do you?

These type of trades have a very high probability of success, only very slightly lower than plum slope changes under yellow when price is above the daily calculated white horizontal line. They are the very highest probability of success trades you will ever see in trading; that doesn’t mean guarantees, so don’t do “stupid shit” like leverage yourself out of your account.

Here we are now a little less than 45 minutes later, directly below.

Ok, you tell me, given the fact the market has just jumped markedly higher AND interestingly enough gone to the upper exhaustion lines and now threatens the day’s high on this Friday, AND THE FACT WE “RANG THE REGISTER [again I might add] already today, do we in fact go back in and trade some more given this hopeful action? For me, “nope” not a chance in hell; given what I wrote earlier in the post, we got a $10 range now with this waterfall, and given recent history [last couple of months] that range I’m betting will hold the rest of the day [and if it doesn’t who cares], so where’s the move gonna come from and go to? Besides, I already booked my profit goal … why in God’s name would I risk that in a “do nothing” POS market on a Friday? “Seriously, do I look like the kinda guy who wants to have sex with myself and mentally ruin a perfectly good upcoming weekend because I did ‘stupid shit’?” [Umm, that was a rhetorical question, OK?]

I’ve been getting a lot of emails lately from people who want to know how I handle all of the stresses of trading, and my typical responses back to ‘em usually go along the lines, “you have no idea the pressure I’m under … the dog … the Mrs. … the turquoise waters & beautiful sand of the Caribbean … Cousin It … chief of Staff Milton Waddums … vegas Jr. … all the brokerage house & LP bullshit. Ya know, it ain't easy being me.”

But, I’m gonna share today my “totally-up-to-now” secret for maintaining “balance” and a healthy trading account along with happy life; I figure it’s time.

For years, as far back as I can remember, I’ve been taking this at least 3 times a day; more if necessary. And man o’ man does this shit work wonders. Directly below, the “secret” of trading & life!

“For best results, take at least 3 times daily with beer.”

Now, since I been takin’ this shit for years, I decided a while ago to help their marketing department promote this wonderful product. So, I took it upon myself to give ‘em some ideas for promotion; I sent them the following pic to use, and I think it kind of sums up what you feel like after taking a few wonderful pills [washed down with some Vitamin C therapy for sure.].

 

And you know what? I haven’t heard a damn thing back from ‘em yet; I’m wonderin’ if they all use their own product to excess?

Nothing like a little humor ahead of a weekend. “Admit it, there for a second I had you didn’t I? C’mon, admit it; who’s your Daddy?” Dog’s fired up for the beach … we’re both soooooo outta here!

Have a great weekend everybody!

-vegas

OPEN A DEMO AND/OR LIVE ACCOUNT AT THE LMFX LINK IN THE “DOWNLOAD LINKS” SECTION OF THE WEBSITE TITLED “OPEN TRADING ACCOUNT – DO IT NOW!”