Optimized Trend Trading

Here I post the final example of this cycle. This thread is about Optimized Trend Trading and not only about fancy indicators.

Here you may see the three objectives. They are reached with a lot of precision (always amazes me) and they coincides with technical support and resistance levels that makes them important (remember there is a correlation between the technical support and resistance and the levels where the orders are)

Maybe this would be the final posts concerning the fibo sequence with the cycles of the fractal characteristics.

You see clearly that the market really moves when it is in its persistent state and consolidates when it is in antipersitent state.

I can make an analogy with the transfer of electrons from one energy level to another it is made by jumps. So it is the fractal break - out when it is combined with volatility produces that.

However there may be two distinct but mixed phenomena. One is the the increased volatility and the other is the butterfly effect of the hit stops.
However the markets nowadays when we go to daily - trade graphics move by persistent movement jumps that can be so fast that sometimes we may not profit by them because of slippage, re-quotes (it depends on the service provider). The good old and slow trends are in the past and are an exception in the XXI century (most of the instruments and techniques were developed for completely different markets that do not exist today).

This is a model bringing some light into extremely complex world.

OK what the market tells us now. The market tells us that all the objectives for the upward movement have been accomplished.
After their reach the market started to consolidate between those two levels (today the market is not truly typical but this is for educational purposes).

That means that we need a new fractal break - out in order that the market moves away from those levels. And we cannot predict in which direction it will take place. There are limits in the predictability. (Well it is not exactly because there are bigger attractors and trend influence but even if we are in the perfect trend there are so many sucker false break )

Meanwhile traders see that and start to make little positions up and down into a ranging trade mode. In the same time there is an accumulation of stops and orders from the both part of the trading channel.

This is the Forex Casino: Red or Black you may like it to play if you like Casino games.
The mechanism is exactly the same. The Croupier is waiting for the players to put their bets. After that le jeu est fini. And there is a break - out. As in the casino the money of the loosers goes to the winners (the stops of the wrong traders fuels the movement of the winners).

No matter which instruments you use in that moment you cannot predict anything the chances are 50 / 50 with iVAR estimation of Hurst exponent 0.5 (Brownian motion)

When we can expect the break - out? During normal market condition we would expect that now the volatility is decreasing after at lunchtime and the chances for break - out are decreasing. We can expect that the volatility will increase at the open of the US session. However I have observed many times break - outs in the European afternoon before the US open and this is a statistical guidance.

Hi John,

man, I'm so impressed with all the work you have put into exploring fractal dispersion and sub-set distributions. I have gone through all your posts, and I'm left flabbergasted, to say the least

Keep up the great work, and looking forward to future posts.
Happy New Year!

I wish you less trouble and more pips to all.
Just to see haw this technique works another Happy New Year shot. Oh yeah, there was a fractal break - out (needed to leave those price levels).

And the price found support where ? Too many coincidences isn't it?

Here on 5 m frame we have the same picture. And it is very important because we have two levels coincidence.. This is to be considered as map. And the maps is not the territory. Still they are useful.

The retracement technique also is fine according to the same rules of finding the initial point.

Here we have a fibo technique starting from volatility contraction, and there the traditional and the fractal technique coincides. In fact the fibo works best after volatility contraction. However the fractal techique allows us to obtain the same accuracy when the conditions are more complex and when the initial point of calculation of the fibo is not apparent.

How and why it works it is open to a discussion. Are the markets psychological and we track those phenomena. Or is there a hidden geometric order in the market? Or more simply the fractal break - out and the first correction set some point fractal attractors to which the price is attracted. We may never know for sure.
Those are just theories.

Hi John,

Have you considered using Jean-Philippe's Fractal Bands as an additional tool?
I use them; first as a visual aid in seeing the contraction and expansion (volatility) of price, as also indicated by FDI (or iVar) and Hurst Diff, and secondly as an aid to establish potential support/resistance areas. I use the settings 15/10/4.0/0/0. The Fractional Bands, also made by J-P, can also be used, with no regards to alpha settings; test with standard settings.

Those fractal patterns open completely new perspectives of technical analysis.
The fun point is that they are independent from other methods of analysis.

I have been observing that more than a year before posting it here. It looks like these patterns started to appear the last 10 years, with the rising of the machines.

The fractal bands offer you a new picture of the fractal and volatility patterns.

I have been thinking of posting it but you made it before me.



I made a classification of those patterns that I will post later.

I have found three day trading strategies using those patterns (you may guess what they are because I revealed the principles).

Stay tuned.

Please do not forget you need the FGDI in order to run those indicators.
There is another indicator on those charts, its name is the Hurst Difference. This indicator is one of a kind. There is not another indicator like that.

http://fractalfinance.blogspot.com/

This is the blog of Jean - Philippe. His work is a major contribution to our community. All his tools are there even there is a hidden indicator on his blog, that has never been published. This is the Frama of Ehler but using different formula for calculation of the fractal dimension. This is one of the best exponential moving averages I have ever seen (even if Jean - Philippe made it by chance on a request of a reader and does not like it, because he considers that the fractal adaptation should be made on a simple moving, and that using a exponential does not make sense because the exponential is already attributing values, however it works really well).

That is a game. I hope you can find it an compile it and publish it on this forum in mt4 file.

Hi John,

You mean this?

and to elaborate further - I'm sure you've got the picture (30m charts)

Suppose this is the link to the Elhers with a different fractal dimension.

http://fractalfinance.blogspot.com/s...Frama+of+Ehler

Regards

tomek

Tomek and CamaRon you were really fast! Real time wow.

Here I add fractal bands that are adaptive according to the length of the cycle period.

So we have a hybrid adaptive indicator that adapts according to the cycle period and according to the fractal geometry.

You have a Nyquist parameter, the default is set to 0.5 of dominant cycle. You can set to 1.0, 1.5 etc.

You have a really nice hybrid adaptive moving average.

When the moving average is pointing up or down and when the volatility lines are expanding. THIS IS NOT THE TIME FOR COUNTER-TREND (COUNTER - IMPULSE) STRATEGIES FOLKS. JUST FOLLOW IT AND YOU WILL BE FINE.

WHEN THE BAND MAKES A PEAK AND REVERSES THIS IS A SIGNAL THAT THE IMPULSE IS OVER.

I add another shot there we tune the indicator to 1.5 of dominant cycle.

John ,

Is it possible to have adaptive fractal band oscillator?Thanks.

Here it is. We use the lost pearl of Jean Philippe, the Frama of Ehler but with another formula of estimation of the fractal dimension.

It makes a very good combination with the jurik mod. If you like it we need to make mods on FRASMA and RS_FRASMA.

Here I add a version of #_FullSSA but here we do not have a normalization.

As for input of the price series I use a moving average if I want to smooth them.

I use for default a period (Periodma) of 2 but you can play with that of course.

In fact the normalization is a deviation (and maybe innovation) from the logic of the SSA. The SSA decompose the price time series.


In the SSA_Normalize we use the component that accounts for most of the variability in the data; it is the lower frequency component.

After that we normalize it by a period of normalization by a moving average.
This is an innovation because we use a scientific instrument and we apply ways of use from the technical analysis indicators. That is not a use a scientific guy would do.

The classical approach is to expore the Singular Spectrum.
You can read the tutorial of CSSA Noxa for 101 of SSA.
http://www.forexfactory.com/showpost...&postcount=844

fajst _k has a clear position
My opinion is that if you use a sufficient amount of lag you are fine. Of course you need to be modest in your expectations and use as additional trend filter. Of course this tool can never ever predict a break - out. And it has to be used when we have a stationarity in the weak sense, forget about it when we have a fractal break out. The next step is to use a Neural net as price input. I did it but it is under experimental stage.

However with this mod we do not do that we just use the SSA without normalization by varying the number of computations we can explore the Singular Spectrum.

For exapmle if I make 1 computation I will see the eigenvetor that explains the most if the variability of the trend. If I use 2 I will explore the next eigenvector. Here when I go to 5 I had the eigenvector that explains the oscillatory component of the price.

Yes it is a classic but we did not have it under Metatrader.

Well it recalculates but if you apply a sufficient amount of lag it would be manageable.

A possible use is together with trader dynamic index of SSA normalize. The SSA normalize of Trader's dynamic index is giving by normalization the oscillatory patterns (we use only the most important eigenvectors and we normalize them, scientifically crazy but, damn it, it works) and the FullSSA is giving us the trend.

This is a conceptual mod and not a trading system.

Here is a picture of my Neural SSA (NSSA). I use neural a net output to avoid the going up and down of the SSA because of the variation of the last bar. It is not stable and not for release yet.

John,

Can you see a way that we can utilize J-P's MTF Dispersion indi?
I realize it's "out of time" with the certain time frame I'm watching, but ...)

And also decrease the load it puts on the system.

I remember we were in contact by PM with Jean Philippe and I asked him to do something to track the difference of the fractal dimension through different time frames. He thought about it and he decided to use the dispersion formula. And he created this indicator.

However we both abandoned the concept afterwards for the use of this indicator. I am glad you are interested by this. Theoretically the ideal time series to trade are when we have a low fractal dimension with low dispersion. I prefer to track two time frames, maximum 3. 5,15,30 m are the key for day trading.

Here I add another version of SSANormalize by Klot. This is the alternative version as he suggested in the code. We use the iDeMarker function.

Well you may like it. And another mod where you can change two more parameters.

One of the Parameters is the Moving average type:
//MA_Method= 0: SMA - Simple Moving Average
//MA_Method= 1: EMA - Exponential Moving Average
// MA_Method= 2: Wilder - Smoothed moving average,
// MA_Method= 3: LWMA - Linear Weighted Moving Average

Experiment yourself what type you like.

The other parameter is to change the Price type
// List of Prices:
// Price = 0 - Close
// Price = 1 - Open
// Price = 2 - High
// Price = 3 - Low
// Price = 4 - Median Price = (High+Low)/2
// Price = 5 - Typical Price = (High+Low+Close)/3
// Price = 6 - Weighted Close = (High+Low+Close+Close)/4

I prefer to use the open prices. And this is the default parameter in this mod.

I like it

can anyone put an alert on crossing 0? ive got as far as making it a histogram

http://articles.mql4.com/374

i have the alert part - which bit references the crossing of the 0 line?

Hi, I have created another SSA mod with histogram but it is different from the FullSSA_normalize. I think it is a good filter for my Digital TSD ASCTrend system, that you can download from the same thread.

http://www.forex-tsd.com/383091-post35.html

This is a mod of bbsqueeze. The version 1 uses the original idea of the squeeze. And I use the SSA for the histogram.
The second uses the SSA both for the dots and the histogram but in two different calculation.

This is my version of SSAsqueeze which is elite indicator and not free. In the Elite indicator as far as I understand the SSA is used only for the dots and they use different kind of moving averages to calculate the histogram. In my mod I use the SSA to calculate the histogram, so it is different.

Here is a video how to use the original squeeze indicator. In the squeeze_caterpillar you have the squeeze (basically you need green dots to take a trade and you do not take a trade when it is blue, and when you have green dots you take a trade in direction of the slope, that's it), and in the squeeze_caterpillar2 you have a SSA calculation instead.

http://www.tradethemarkets.com/products/item5.cfm