As I stated earlier, I do not use a defined set of rules for trade entry, exit or trade management. This applies to all time frames that I trade: Long, Intermediate and Short Term. I focus on buying and selling at what I believe is a good value based on my objectives. I did mention that I use guides. I have several means of entry and exit and I use them when my subconscious says.."do it". River Theory is one of guides and the main one I want to discuss here. I know there is a methodology called Ocean Theory and I think it was developed by a man named Jim Sloman. I have been to his website before. This has absolutely nothing to do with his method. I live on a River that flows to the Chesapeake Bay and hence the analogies.
I plan to discuss mainly my short term trading here in this journal. It offers the most opportunity to interact and discuss trading the currency markets. Over time, I found it very time consuming and difficult to stay aware of short term value levels across the six or so markets that I trade. Over time, I developed an algorithm of sorts. I am no mathmatician by any means. I spent many months studying the code available with my trading platform and finally came up with a combination that would take what I was manually studying and transfer it to my platform and produce LINES on my short term charts. I mentioned that I like the water and see many lessons that relate to trading. I named my style of short term trading - RIVER THEORY. I like to give things names as it helps my subconscious process information easier.
Following is an explanation of sorts of what it is. What I have done is nothing special and could be done by anyone with enough determination.
River Theory - The Methodology
I have always tried to use the constant tidal flows of water or currents as an analogy to help trade the constant flows that occur in the markets. As sure as the sun rises, these events occur. There are large dominating flows that are similar to ocean movements and smaller river flows at work ebbing and flowing from the large oceanic flows. Water, like price is always seeking equilibrium. Trying to find the balance point and then moving away again and again. RiverTheory attempts to help define those smaller flows since they are arguably easier to predict. Tidal rivers flood and ebb on a constant predictable cycle. Some tides are extreme, but in general the flows operate in predicable time tables. Price movements in tradable markets are very similar. A final observation and analogy is that under most conditions navigating the flows of a river are much less risky than navigating the unknowns associated with travel on oceans.
I have designed a mathematical indicator that attempts to define the “equilibrium” level on a dynamic basis as markets unfold on an hour-to-hour basis. I named this concept River Theory and the level that represents equilibrium is called River.
Adaptive Dynamic Value (ADV) – The River or Equilibrium Level
The core methodology of RiverTheory is based on a concept called Adaptive Dynamic Value (ADV). Simply stated, ADV defines the current “flow of the market” by processing information that is occurring in the present. Not what happened yesterday or last week. There is always a micro flow within the market that is influenced by what is known and to some degree what is expected or unknown. This type of emotional flow may be caused by data releases, news, option related supply/demand, and key technical levels that will drive markets for a short time. Often it can be for only one session or part of a session. Price can reverse or return to true equilibrium after a session or event has passed. When a trader uses RiverTheory he can not trade with bias to longer term value or fundamentals. All he can be concerned with is capturing the current flow of the market based on what is known.
I will continue the discussion in Part 2.
I plan to discuss mainly my short term trading here in this journal. It offers the most opportunity to interact and discuss trading the currency markets. Over time, I found it very time consuming and difficult to stay aware of short term value levels across the six or so markets that I trade. Over time, I developed an algorithm of sorts. I am no mathmatician by any means. I spent many months studying the code available with my trading platform and finally came up with a combination that would take what I was manually studying and transfer it to my platform and produce LINES on my short term charts. I mentioned that I like the water and see many lessons that relate to trading. I named my style of short term trading - RIVER THEORY. I like to give things names as it helps my subconscious process information easier.
Following is an explanation of sorts of what it is. What I have done is nothing special and could be done by anyone with enough determination.
River Theory - The Methodology
I have always tried to use the constant tidal flows of water or currents as an analogy to help trade the constant flows that occur in the markets. As sure as the sun rises, these events occur. There are large dominating flows that are similar to ocean movements and smaller river flows at work ebbing and flowing from the large oceanic flows. Water, like price is always seeking equilibrium. Trying to find the balance point and then moving away again and again. RiverTheory attempts to help define those smaller flows since they are arguably easier to predict. Tidal rivers flood and ebb on a constant predictable cycle. Some tides are extreme, but in general the flows operate in predicable time tables. Price movements in tradable markets are very similar. A final observation and analogy is that under most conditions navigating the flows of a river are much less risky than navigating the unknowns associated with travel on oceans.
I have designed a mathematical indicator that attempts to define the “equilibrium” level on a dynamic basis as markets unfold on an hour-to-hour basis. I named this concept River Theory and the level that represents equilibrium is called River.
Adaptive Dynamic Value (ADV) – The River or Equilibrium Level
The core methodology of RiverTheory is based on a concept called Adaptive Dynamic Value (ADV). Simply stated, ADV defines the current “flow of the market” by processing information that is occurring in the present. Not what happened yesterday or last week. There is always a micro flow within the market that is influenced by what is known and to some degree what is expected or unknown. This type of emotional flow may be caused by data releases, news, option related supply/demand, and key technical levels that will drive markets for a short time. Often it can be for only one session or part of a session. Price can reverse or return to true equilibrium after a session or event has passed. When a trader uses RiverTheory he can not trade with bias to longer term value or fundamentals. All he can be concerned with is capturing the current flow of the market based on what is known.
I will continue the discussion in Part 2.
i like your philosophy and will be following your GU thread closely. the pair is the only one i trade so i will be keeping a close eye... i have a feeling we will talk more
