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Attachments: Analysis and Trading based on Envelopes, Waves, Cycles
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Analysis and Trading based on Envelopes, Waves, Cycles

  • #3,641
  • Jul 15, 2020 5:36am Jul 15, 2020 5:36am
Being a very simple guy, my simple observation is meaning that we look for direction off
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the alignment of the 3 Envelopes and the fastest being 32 I just add the FLD 32 and trade in same direction
  • #3,642
  • Jul 15, 2020 6:01am Jul 15, 2020 6:01am
Simple use of templates to quickly see the Envelopes expand with larger and larger timeframes
(just my way)
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  • #3,643
  • Jul 15, 2020 6:01am Jul 15, 2020 6:01am
Quoting OAPDave
Being a very simple guy, my simple observation is meaning that we look for direction off{image} the alignment of the 3 Envelopes and the fastest being 32 I just add the FLD 32 and trade in same direction
That is the good observation to do.

Robust but sound.

Sophisticated thinkers call that " a set-up" !
  • #3,644
  • Jul 15, 2020 10:38am Jul 15, 2020 10:38am
Alain
You know my nemesis is the GU and yes we have a little banter about Grids but at the moment I am trading with real caution, the reason being
For want of a better words we are hovering around the (mean) on my favoured grid (4/8ths/pivot)
The 256 Envelope centered moving average (mean) is trading sideways atm
if you are quick on the button, pips can be made either up or down, but not for me yet
ps
I have a few other pairs on my radar
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  • #3,645
  • Jul 15, 2020 12:18pm Jul 15, 2020 12:18pm
The 'Envelope Method' was first described by J.M. Hurst in the United States in 1970 . The name is derived from the fact that share prices can be shown to remain within Envelopes or Channels of constant depth, and a fairly simple analysis of the share price data will provide all of the information necessary to draw these Envelopes.

The 'Envelope Method' technique is an extremely powerful method for determining the most probable course of the share price over the near future, taking into account the degree of randomness inherent in share price movement. It will alert the investor to the probability that a trend in the share price will change direction within this future time window, so that the investor is well placed to take advantage of the change once it has been confirmed.

Note the above emphasis on confirmation that a change in direction has occurred.

'Envelope Method' .is a probability based method that takes into account the cyclical predictable components and the unpredictable random components of share prices.

'Envelope Method' therefore signals that it is highly probable that a trend will change direction at a certain point in the near future, but there is still a finite possibility that the direction will change sooner or later than this.

Waiting for confirmation of a predicted change will prevent the investor from jumping in too soon and be carried along in the wrong direction by an adverse trend that seems never-ending,

The use of terms such as 'probability based', 'predictable cyclical components' and the like may give the impression that a degree in mathematics or statistics is necessary before an investor can begin to understand or take advantage of channel analysis. Nothing could be further from the truth, since excellent results can be obtained with nothing more than a chart of a share price and a pencil. In other words, channel analysis is an ideal technique for those investors who are inclined towards charting methods in general.
  • #3,646
  • Jul 15, 2020 1:08pm Jul 15, 2020 1:08pm
The guiding principles of the Envelope Method technique can be encapsulated in a number of observations:

• Share price movement contains both random and cyclical components

• A channel of constant depth can be drawn so that the share price penetrate the channel boundaries on only a few occasions. The depth
should be the minimum possible commensurate with the restriction on boundary penetration.

• The channel can be projected a limited distance into the future. Future price movement will obey the same rules as past movement. ie the vast
majority of the movement will be contained within the channel

• When the share price approaches the upper or lower boundary channel, there is a high probability that it will reverse direction

• The shape of the channel is due to cycles, i.e. trends, in the share price of periodicity greater than the periodicity of the channel.

• The price movement within the channel is due to random movement and the effect of cycles, i.e. trends, of periodicity equal to or less than the channel itself.

• Further channels can be constructed outside existing channels. The rule then is that the outer channel should be constructed with the minimum
depth possible subject to the restriction that the inner channel should not penetrate the outer channel substantially.

• The advantage of using several channels nested within each other is that they can be drawn so as to represent short term, medium term and long
term trends.

The investor will then be able to estimate for how long a particular trend will persist before it is forced to change direction by a more dominant longer term trend.
  • #3,647
  • Jul 15, 2020 1:55pm Jul 15, 2020 1:55pm
Do you have to change the code in trading view to make them shifted center moving averages???
  • #3,648
  • Edited 2:43pm Jul 15, 2020 2:31pm | Edited 2:43pm
Quoting parisboy
{quote} FXEZ, thanks for your interest and nice words. I know there are a few tools that Hurst provided to deal with projecting the averages forward in time. I know nothing about such tools. And I think I have an extensive knowledge of what Hurst wrote in Profit Magic, Cyclical Analysis and in its Cyclitec Course. The reason is projecting the averages forward was NEVER a preoccupation from Hurst.
Thanks for all your responses and analyses. I think you're aware of projecting centered averages forward as you just posted something in post #3646 from Hurst that mentions this. But Hurst used the word extrapolate, which I interpret to be the same as projecting or predicting the future location of the average. I will post my notes from Profit Magic chapter 6 that talks about this - particularly point #2 below covers this:

Quote
chapter 6
1) For the dominant cycle, compute the centered average. So if 20 periods is the cycle - plot the 20 period centered average. Then compute the half span average or the 10 period average and center it.

2) Extrapolate into the future the place where the two averages will intersect. This point is approximately halfway in the cycle from the peak to the low or the low to the peak. From this halfway extrapolated point we can measure the distance from the cycle high/low to the intersection and take the price difference to get how far the price has already come. This should be half the move. So simply subtract/add an additional half move from the current price at that point to get the projected price for the cycle swing!

3) Use a 10% tolerance on entry prices generated by this method.

4) Create inverse half-span plot by taking the price and subtracting the centered half-span average.
a) Count the low to low and high to high averages to get the cycle lengths.
b) The deviations show the magnitude that is apparent in the envelopes plot but more directly.
c) Helps identify the component of deviation below the trading cycle. This can be used for setting up trailing stops and sell signals in general.

5) Use odd numbers for lengths of averages.
  • #3,649
  • Jul 15, 2020 3:58pm Jul 15, 2020 3:58pm
Quoting FXEZ
{quote} Thanks for all your responses and analyses. I think you're aware of projecting centered averages forward as you just posted something in post #3646 from Hurst that mentions this. But Hurst used the word extrapolate, which I interpret to be the same as projecting or predicting the future location of the average. I will post my notes from Profit Magic chapter 6 that talks about this - particularly point #2 below covers this: {quote}
FXEZ thank you for your observations. It refreshes my memory

Hereunder you will find the only "Envelope Extrapolation " posted by Hurst in Profit Magic - Chapter 4 - page 76 with some additional explanations.


SETTING UP PRICE-TURN PREDICTIONS


In Figure IV-4 everything we've learned about the stock so far is presented on one chart.

We've gone further and sketched in an estimated continuation of each channel for the next five months.

The outer envelope is simply extended at the same rate of curvature.

L-3 timing is based on the three-weeks-to-a-low estimate previously formed, while the price level at that same time is determined by the lower bound of the outer envelope.

L 4 is located an additional 19 weeks from L-3.

The high in October is pretty much of a guess at this point, except that we know it is likely to occur more than halfway from L-3 to L-4 because of the uptrend of the outer
channel.
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  • #3,650
  • Jul 15, 2020 4:06pm Jul 15, 2020 4:06pm
Quoting kaihkaih
Do you have to change the code in trading view to make them shifted center moving averages???
Look here :

https://www.forexfactory.com/showthr...6#post12751156
  • #3,651
  • Jul 15, 2020 4:23pm Jul 15, 2020 4:23pm
Quoting FXEZ
{quote} Thanks for all your responses and analyses. I think you're aware of projecting centered averages forward as you just posted something in post #3646 from Hurst that mentions this. But Hurst used the word extrapolate, which I interpret to be the same as projecting or predicting the future location of the average. I will post my notes from Profit Magic chapter 6 that talks about this - particularly point #2 below covers this: {quote}

a) Now when your 10-week average tops out, you can extrapolate both the ten- and 20-week averages through their lag periods up to current time.

This is quite simply accomplished for the 20 week average especialy, since it is so "smooth." Note the price level at which the stock, the 10-week Moving Average extrapolation, and the 20-week Moving Average extrapolation meet.

b) We extrapolate both the 10- and 20 week averages to current time. These meet the stock price at 41. The stock has already moved up from 32, a total of 9 points.

c) Extrapolation of the averages results in intersection with the stock price at 43.75. The stock has moved to this price from 35.125, or 8.625 points. We anticipate a further move of this amount to 43.75 + 8.625 = 52.375. As usual, we put a tolerance of 10 % of the total move about this price to get a zone of 50.625 to 54.125 with the target price of 52.375.

The "extrapolation" of the averages seen by Hurst is just the continuation of the said averages with a straight line.

I would hesitate to design this as a specific "technique". This has in my mind and in Hurst mind (I assume) nothing to do with an Envelope Extrapolation., but much more with the Crossing of both full-span and half-span averages which Hurst use to calculate Target Prices.

Let's say that Hurst gave us some hints we can exploit. But nothing we can compare with the work of Brian Millard who wrote several books on the subject ..... and went nowhere (IMHO)
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  • #3,652
  • Jul 15, 2020 4:52pm Jul 15, 2020 4:52pm
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  • #3,653
  • Jul 15, 2020 5:46pm Jul 15, 2020 5:46pm
Quoting parisboy
The "extrapolation" of the averages seen by Hurst is just the continuation of the said averages with a straight line. I would hesitate to design this as a specific "technique". This has in my mind and in Hurst mind (I assume) nothing to do with an Envelope Extrapolation., but much more with the Crossing of both full-span and half-span averages which Hurst use to calculate Target Prices. Let's say that Hurst gave us some hints we can exploit. But nothing we can compare with the work of Brian Millard who wrote several books on the subject ..... and...
Whether you wish to call it a technique or not, I think it's interesting that we have two ways to do almost the same thing. By extrapolating the averages forward and calculating the distance traveled to their intersection, we can get a prediction for the end of the next swing. We can do the same thing with FLD.

You've written many things on the use of FLD and shown many nice examples. FLD as you use them seem to be a short term average of price projected some periods into the future. FLD is already projected into the future from the past so there is no need to extrapolate. However FLD and price are noisier than the longer averages so determining when the jagged lines have crossed may offer some difficulty when they nearly overlap.

So neither is perfect but both may be good tools to use.

In total it's nice to have multiple ways to confirm the same thing. And I agree that this isn't the same as what you show in the picture in post #3694 where the future envelopes are plotted many swings ahead. The accuracy of a prediction tends to decrease as the length of the prediction increases. So just using either FLD and price cross or centered MA and half MA cross for the next swing seems like it is a good tool with some uncertainty.

But projecting envelopes into the future a short bit can be done as easily as projecting a moving average into the future. The accuracy of MA projection increases with longer length MAs and is less with shorter MAs. Hurst talked about just drawing a line out from the last two points or something like that. Millard in the short "channel analysis" pdf says:

Quote
page 14b Extrapolate channels into future:
1) Start with outer channel and continue the curvature into the future.
2) Taking the next innermost channel, do the same but make it bounce off the previously drawn channel boundaries at points where it would otherwise cross.
3) Where channels are forced to change direction, use the principle of symmetry for a short distance either side of the turn.

This is essentially a simple manual regression algorithm for extrapolating channels into the future. I note that the recent prices can cause changes in the curvature of the current channel as old prices roll off, so even without any real movement. I used that knowledge to develop my algorithm to do a bit better than simply a straight line or following the existing curvature.
  • #3,654
  • Jul 15, 2020 10:07pm Jul 15, 2020 10:07pm
I had fun scalping the S&P 500 today with these envelopes. There are so many trading opportunities just focusing on the interplay of the orange (mid band) and the yellow (long band).
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  • #3,655
  • Jul 16, 2020 12:57am Jul 16, 2020 12:57am
Quoting Sohocool
Hi Parisboy , Hi all, HAPPY NEW YEAR 2020. PBChannel_v1 indicator , you set the UT256 Bands in PIPS (points) And the UT128 and UT32 Bands are settled automatically . {image} 3525447 {image} {image} {file}
Hi Soho,

Does this indicator uses Centered MA or Linear weighted MA (LWMA)?

Thanks!
  • #3,656
  • Jul 16, 2020 3:57am Jul 16, 2020 3:57am
Parisboys Envelope Method + FLD32 & Sohocool Indicator version of
You decide your Timeframe or even combinations of ?
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  • #3,657
  • Jul 16, 2020 6:19am Jul 16, 2020 6:19am
Them lines them lines
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them dam lines lol
  • #3,658
  • Jul 16, 2020 9:02am Jul 16, 2020 9:02am
5min chart update
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  • #3,659
  • Jul 16, 2020 11:14am Jul 16, 2020 11:14am
Quoting good-daimon
{quote} Hi Soho, Does this indicator uses Centered MA or Linear weighted MA (LWMA)? Thanks!
Hi Good daimon,

The PB (Parisboy) Channel is exactly build like ParisBoy explain on this thread ,Simple Moving averages shifted -16.

KISS&V :Keep it simple safe & visual
  • #3,660
  • Jul 16, 2020 11:18am Jul 16, 2020 11:18am
Think you have to see it to believe it ?
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