Funny Looking Rectangles & Useless Drivel

Thank you iDoubleStoch!

Looks great! Another quick output I would add is, how much of a pip draw down the levels that weren't reached had and how long it took for the price to return to if it ever did. And then you can see what indicators/parameters/patterns would reduce the "bad" trades and increase your odds that way.

Thank you iDoubleStoch for discussing your model

This is my 1st attempt to draw my own funny boxes. I chose EURCAD pair as I never traded it before and I'm not familiar with its PA.

The paralelograms were drawn according to rules and the SMA28 (2x14 standard) is my attempt of a long term indicator. By "coincidence", price seems to move from intersection level towards the SMA line, that's ok by now.

Now there's a problem at 5:00 period as Open price is HH for that period, how do we draw the 1st vector.
Also there's 2 LLs at 5:33 and 5:37, which one to chosse?

Another coincidence is that price retraced to intersection 3 level exactly 1 hour from intersection point.

Someone was asking what to do if the market starts a trend from the open and does not produce either a new high or new low, can't find the post right now but, this is what I do; use the previous days open line. In this example I used yesterdays High line since today did not produce a new high. Here's a pic to explain.

I actually would agree with you on this 'workaround'

Here is an update

I really should not be doing this, but the variable in B2i that you two just discovered and posted a "work-around" for is the kind of thing that causes me to realize that my doing these sessions is worth the effort. It is worth it when I see somebody using their BRAIN to figure things out and using their CREATIVITY to solve problems. That is what trading is all about: Solving Problems. Congratulations! Problem Solvers make really good Traders. You have to enjoy solving problems and coming up with creative solutions that work. That means plowing through a lot of ideas and that means a lot of research. The race is given to those that endure in their research.

What you have discovered on your own is what I call a High Compression B2i Structure. It simply means that whenever you see a structure with little to no delta (gap/distance/separation) between the Primary Lines and the Projected Lines, price is more than like running a Gap Maneuver away (either up or down) from an 8 Period SMA (or some similar MA calculation). When you see a High Compression box like that, run a 8 period moving average and note whether or not price is gapping AWAY from the MA line by creating a significant "gap" (distance away from) between itself and the 8 period MA. If you see that, one of two things is happening in the market according to THAT time frame:

1) The market is extending itself in either Market Phase 1 or Market Phase 2. That so-called "trend" is being extended to some degree in THAT time frame. Review post number 72 in this thread: http://www.forexfactory.com/showthre...83#post7636083

2) Price is about to enter what I define as a Transformation from Market Phase 5 to a brand new Market Phase 1, Market Phase 1 to a brand new Market Phase 5, for THAT time frame.

I call it: A Market Fast Gap.

If you study a 1 Minute Chart using a 8 MA of some smoothed variety, you will begin to realize that the market behavior just before a 5 to 1, or 1 to 5 Transformation in THAT Time Frame, includes this "Fast Gap" behavior where price extrudes itself and creates Distance from the 8 MA that is empirically or statistically greater than the normative gap distance between itself and the 8 MA. The Fast Gap is relative to the 8 MA.

I cannot teach you how to think the way I do. All I can do is show you what my brain recognizes when I study market behavior. People will always want to know: How did you know that? There is no pat answer I can give you. I never know anything UNTIL I begin studying the data and searching for repeatable patterns.

The Fast Gap is one (1) way in which the market continues a so-called "trend." The really difficult part is that the Fast Gap is also one (1) that the market initiates a 5:1 or 1:5 Transformation. YOU have to study the WHY. I don't have time to get into that here. There is a lot more to so-called "Price Action" than most novice Traders realize. The market has a lot of characteristics that are predictable. The Fast Gap is one of the markets "hidden" (so to speak) signature characteristics with a homographic type of meaning. It could be Continuance, or it could be Transformation. You will need other tools to help you further refine which type of Fast Gap you are observing. Now, you know why I have over 100 indicators working together in the system. Each indicator is unique in identifying its own market signature. No one indicator is capable of doing all the work. That's why indicator synergy is so important and that is where your skill for designing wrapper logic that integrates multiple indicators becomes so important to the overall accuracy of your system.

These are not mere words on your computer screen. You have stumbled upon the work of Signal Identification and Signal Integration. The Fast Gap is a signal, but it must be integrated with others to become useful, reliable and supporting to an overall system. This is NO small matter and it gets to the absolute heart of Integrated Trading Systems Design. Something that will go in one ear and right out the other ear for most Traders.

Remember, everything in Technical Systems Based Trading is predicated on observing and accounting for Price Action in Multiple Time Frames for good Situational Awareness. If you are going to reach the higher echelons of accuracy in your trading, to the point where what you do seems like "magic" to other Traders, while mitigating risk as much as possible, you have to learn the skill of simultaneously accounting for price action in multiple Time Frames. That is a Visualization process/skill that you have to find a way to develop on your own.

In post number 43 (http://www.forexfactory.com/showthre...22#post7635722) you can see that hours 03:00 and 05:00 almost had no delta between their primary and projected lines (a very tight looking structure). When you see a structure like that, you can almost be certain that the market is Fast Gapping the 8 MA. You will have to plot the 8 MA on a chart to observe for yourself. A 1 Minute chart shows this characteristic much more clearly. Just remember, those Fast Gaps apply to THAT 1 minute chart. They have simple definitions:

Positive Fast Gaps

Occurs when price accelerates away from the 8 MA and in the same direction and creates an empirically recognized delta (distance/gap) in pips between itself and the 8 MA line. This Delta/Gap can be measured and quantified as being non-normative or dissimilar to the average distance/gap between price and the 8 MA line.

Negative Fast Gaps

Occurs when price accelerates away from the 8 MA and in the opposite direction and creates an empirically recognized delta (distance/gap) in pips between itself and the 8 MA line. This Delta/Gap can be measured and quantified as being non-normative or dissimilar to the average distance/gap between price and the 8 MA line.

Never do anything in this business as a Technical Trader without Measuring and Quantifying the WHY. There has to be hard empirical evidence behind your beliefs about the market. This is also why most "patterns" you find won't cut the mustard. Why? Because, there won't be enough empirical (statistical) evidence behind their repeatability to sustain any further research and certainly not enough to rise to the level of actually implementing such "discoveries" into your trading. Never allow weakness into your system. Play to your strengths and only allow those indicators that are strong to take part in the decision making process.

Summary

When you see such B2i structures, it is a good idea to know whether or not they are associated with 8 MA Fast Gaps and if so, which type of Fast Gap (Negative or Positive) is taking place in the market. This could be a clue as to whether or not Continuation or Transformation (5:1 or 1:5) is about to take place and you can know it before the rest of the Mass Market knows it. You can now begin some creative integrations between 8 MA Fast Gaps and B2i structures.

When you see such structures, price will have a very high degree of probability for snapping back towards the Open level of the original B2i structure, providing an even bigger trading opportunity. However, you NEED to correlate that type of B2i structure with the price behavior relative to the 8 MA in the Time Frame you are observing. Look for Directional Synergy between where the original Open price of the structure resides and the type of Fast Gap taking place.

This post could actually be considered an introduction to Signal Integration 101, A Subset of Trading Systems Development. However, I won't be taking it that far. Re-read. Learn what you can and keep creating "workarounds." Those "workarounds" are actually optimization steps necessary to move B2i to Version 2.x, which you are well on your way to doing.

There is more to B2i than meets the eye. Rhyme not intended. Keep up the good work. I am not "back." I just wanted to recognize your discover, give you another corresponding tool to work with relative to B2i and help you along your way to your own Version 2.x. 8 MA Fast Gap can help you get there. But, it is up to you to do the work.

There is always a premium paid to those who engage in creative problems solving as Traders. As a Trader, that is all you really are - a problem solver. You solve problems. That's what you do. If anybody asks you what you do for a living, you won't be lying when you tell them: I solve problems for a living. That's sometimes what I tell people, when I don't want them to know that I am a Trader/Private Money Manager, as their eyes roll back into their head based on their preconceived notions about what a "Trader" means. Some people think that being a "Trader" is an evil thing.

Often times, I just tell people that I am a Systems Engineer and then I leave it at that - changing the subject quickly. I'm not lying because that is precisely what I do - I design systems. I just don't offer the rest to them in conversation. When they push further in the conversation, I just tell them that I'm a Trouble Shooter. When they press even further, I tell them that "I handle difficult to solve technical problems that are systems related." A handful of people will ask what type of systems and I tell them, "proprietary systems." One out of 100 people will ask what kind of proprietary systems and at that point I simply say, "I am under strict NDA not to disclose the type of systems I work on." That typically ends all further discussion about what I do "for a living" with most people.

Bottom line - you are a creative problem solver.

http://i62.tinypic.com/11t2444.jpg

http://i58.tinypic.com/15i3urr.jpg


http://i60.tinypic.com/rciy45.jpg

Keep exploring, Jasakreatif. Knowing where the market is going before it gets there is of "some" particular value to a Trader.

Thank you for the compliment.

And for the explanation, I will always be looking to improve anything I do.

Not, much work to do today. My trading day was over about 30 minutes after my start time. So, I thought I would use an example that dove-tails off the last GBPUSD post someone made last week, to show you an extension that comes out of B2i Version 2.x. It is a Trade Extension using Fibonacci Arcs. It is not difficult to figure out how to place the Arcs to derive the 61.8% lines, but the logic behind the WHY is a bit "difficult" for me to explain. The reason is that once again, doing so would force me to expose deeper ideas that I am not discussing in public. So, hopefully, this gives you yet one more way to think creatively about B2i, and trading in general.

http://i58.tinypic.com/2cz3skh.jpg

Note the new "useless" lines and "useless" drivel associated with each new line. Take you time studying this chart. Take nothing you see here for granted. Notice the behavior of price when it strikes certain areas or zones where there is Confluence between standard B2i Projection Lines and these new Arc Lines. Now, take a deep breath and walk yourself step-by-step through the picture and THINK things through to their logical conclusion. This is an H1 Chart, so you have to THINK in terms of the H1 Time Frame. You can do this on any chart time frame, but I selected this one because it was most readily available and already plugged into this thread from last week.

What's the basic principle here? The idea here is to take advantage of multiple trade opportunities from B2i WHEN it allows for it - that's it. There is nothing "fancy" going on here, other than a creative idea about extending price behavior beyond the initial B2i Target Level, to another Fib Arc Target Level, predicated on the original B2i structure itself. A very simple idea.

You are already familiar with the basic B2i structure. You are already familiar with the three (3) different types of Fall Lines. All this chart does is ADD two (2) Fibonacci Ranges with their associated 61.8% Arcs. Now, the question is: Where do I begin drawing the ranges for each set of Arcs. The answer is simple. First, notice the new lines:

- Arc Number #1 is the Confluence Determination Arc
- Arc Number #2 is the Confluence Target Arc

Those two Arcs produce the:

- Confluence Fall Line
- Arc Intersection

The Confluence Fall Line Level is drawn right at the Arc Intersection and extended out into the future. Notice how far away from the original completed B2i structure these targets and lines extend. When people tell you that you cannot know what happens "next" in the market, ask them how much homework have they done. (Set your Fibonacci Arc Levels to project the 61.8% level)

Step 1: Draw Arc 1 from the original Open price of B2i DOWN to the Lowest Low.
Step 2: Draw Arc 2 from the original Lowest Low price of B2i UP through the Projection Line to the B2i Intersection.

You have just the B2i Extension.

Now, it is simply a matter of watching how price behaves at the Intersection Window. The Intersection Window is where Arc 1 intersects or touches both the Neutral B2i Fall Line and the Negative Slope B2i Fall Line (shown with the first two blue circle highlights). That Intersection Window is empirically reflective of imminent reactionary price behavior that has a high probability tendency to catapult price into the direction of the Confluence Fall Line. With strong momentum, the Confluence Target (Arc 2) will be struck.

I discovered this unique price behavior many years ago and it never ceases to amaze me how reliable it is under specific conditions:

- You really do need to have a good Long Range Market Bias Indicator that you can trust

That is the one caveat here, because I cannot get into precisely how my system goes about making the decision to take the Secondary Trade back to the Confluence Fall Line and the Confluence Target Arc (Arc 2). However, I can say that the idea here is to pick apart the market by using the dominant (market bias) indicator that works best for you and using B2i to add some extensions and additional trade opportunities that establish Entry Windows (Intersection Window).

Keep in mind that Fibonacci Arcs are TIME based as well, in the way they are used here. Note that if you have drawn the Arcs correctly, they should always oppose each other in Direction, thus creating the Arc Intersection level, the Intersection Window and the Confluence Fall Line (not to be confused with the three different B2i Fall Lines). Note also that the Negative B2i Fall Line is depicted in this example because that is the type of B2i structure the market created. You don't force a Negative or Positive Slope B2i Fall Line. You simply plot what the market gives according to the structure the market creates. You don't dictate to the market what it should do. You simply wait for the market to do something and then track its behavior.

Ok. Admittedly, for those that did not catch on to the original B2i structure concept, this one will prove to be somewhat challenging. However, please note that this is NOT complex at all. You just have to slow down, re-read what's been given to you and begin drawing on your own until you get the concept. Keep in mind that I used the same H1 GBPUSD chart that a member had posted last week. You can vary the Time Frames for doing this, but keep in mind that small time frames will result in higher levels of relative volatility and smaller pip ranges to work with. Or, you can simply do what I like to which is plot all structures on the M1 chart, regardless of which B2i Time Frame I happen to be using. That way, I can see price movement at a more granular level.

I promise you that there was much more to B2i than meets the eye and I believe this post delivers. Study this completed example and then start hunting for your own opportunities while getting used to drawing the correct components: Arc 1 (Confluence Determination), Arc 2 (Confluence Target), Confluence Fall Line and Arc Intersection. Giving you the inherent Intersection Window, where your Entry Decision is made.

Remember, you are a creative Problem Solver. You are simply looking for reliable ways to consistently profit from what the market gives you, using empirical evidence for your decisions.

Re-read it. Explore it. Have fun with it. LEARN something from it.

Dispel the myth the patterns don't exist.

Hi iDoubleStock, you are too kind, thank you for the compliment.
I'm glad to know of you again.

There's a post where you mention Mathematical Model Driven Trading, I've googled this but I don't think I got anything relevant. Could you please point me the right direction, thanks.

k

Something like this?

Hi iDouble

Nice to see you here again thanks for your explanations of the B2i's I have been playing around with them on my charts and I must say it interesting how often they then hit the "wanna bet" level I'm taking it slowly as I have only been doing this for 3 weeks but like this system and have been trying to take the MA's into account with it as well.
I find the Fib addition interesting but not sure how to get the 61 retracement to be something other than a straight level on the chart...... going to go and try to figure that out now though. Just wanted to let you know that you have given me food for thought and I appreciate it...

Hi iDoubleStoch and Everybody!

First of all, thank you so much iDoubleStoch for sharing this little piece from your trading arsenal and for showing me a very good way to classify patterns.

Here is my little contribution to this thread. I made this indicator to quickly visualize the B2i boxes and their levels. You can expand further from this if you wish and feel free to modify and share

There are 3 settings:
maxBars: This is the number of bars that you want the indicator to run for
forTimeFrame: Specify which time frame boxes that you want to draw
drawEvery_X-Bars: If you set this to 0, then it will draw every forTimeFrame, or if you set it to a value, then it will draw every X bars.

For example, what I have done is drop it into M15 chart and to see H4 boxes, I would set the forTimeFrame to 240 (or H4) and if I want to see a box drawn every 2 hours then set the drawEvery_X_Bars to 8 (16 M15 bars in a H4 bar, so half of that). This is how that would look like (which looks pretty good if you are only looking at the past few months/weeks and don't zoom out)


Please don't be mislead by these levels and don't use this for live trading. There is still A LOT of work that you will have to do in order to figure out which levels have a higher probability of hitting. If not, you could be in for massive draw downs or margin calls. Here are levels from 4yrs worth of data.

Above is 4hr bar boxes drawn every 2hrs


Above are 1day bar boxes drawn every day.

Anybody got any ideas on how to figure out the higher probability boxes, please do share!

SaverO, thanks for your generosity

It just means that you analyze the data that you use to make trade decisions using statistics. You first have to develop an idea for an indication of what the market will do under a set of conditions that you define called "trade logic," and then you test that theory scientifically to track the success or failure rate of the idea based on your definition of success or failure. You then use the success/failure statistics/data that you compile to help you determine the viability of the idea you created. That is a rigorous process which will be a staple in the way you approach Indicator Design. There is more to it than that, but that is the concept. You also want to look-up the definition of MAE and MFE (Maximum Adverse Extension and Maximum Favorable Extension). These are very important concepts for to measure. The data you gather from your MAE/MFE analysis can sometimes lead to the discovery of new indicators. Never allow anyone to tell you that MAE/MFE Analysis is not important to your work. Once you discover the definition (google it) you will come to understand how important such analysis can be.

The "Model" I created is unique to my work. There is no book for that. However, you need an idea to evaluate, a test environment in which to conduct measurements of that ideas performance and a theory for how you will integrate that idea into your current trading methodology or system of trading.

1) Create a trading idea. This is the logic/theory you use for determining market movement.

2) Create a proper environment for testing that idea. I use raw market data inside Excel. I can do whatever I want to the data inside Excel. You would be surprised to find out who uses Excel for prototyping of numeric, logic and mathematically drive ideas.

3) Evaluate the viability of the idea by developing proof based on the statistical analysis of the idea's performance including MAE/MFE Analysis (you need to google MAE/MFE)

4) Determine how best to use that idea in your trading. This is how you integrate trading concepts into what you are already doing - or initiate a new trading model altogether.

This is not the full sequence I use for developing trading systems, but it is a good foundational start for getting into statically based indicator development. The trade logic I ultimately develop is based on the MAE/MFE envelop data I generate from every idea I test and evaluate. I need to know how good the idea really is against history and by walking forward in time. I compare the historical (backtesting) results with the walk forward results before making a decision about whether or not I should spend more time developing the concept and moving into a pure forward testing mode followed ultimately by a live cash testing mode. I always maintain a small test account with real cash for this purpose. If I get the live testing results that I am looking for, then I go to work on full scale integration into the system of the new idea or concept.

That's my general workflow, but there is a lot more involved and I follow a number of different develop protocols along the way to help with quality assurance. In other words, I follow the same set of protocols for design, engineering, testing, evaluation and implementation for all new concepts that come down the creative pipe-line. It takes a long time before a concepts becomes a living, functioning organism within my trading system. I don't simply toss a new untested idea into the system. Every idea must be vetted through the same rigorous process. It is a lot of work, but the payoff is Quality Control. I don't allow junk into my trading system.

It is a pure matter of self discipline at the end of the day - for all Traders. How you go about instilling that self discipline into your trading is up to you. This is the way I happen to roll. Others may roll different.

I would second this approach because not only this is precisely how I do it, but it is the only logical approach coming from a systems and engineering point of view, where an degree of failure cannot be tolerated and high reliability is required. Isn't that what we all (well, maybe almost) want out of a trading system? That's also what bewilders me why there are people who still reject this approach and stick to their dogma, that no longer works from a statistically point of view, but they are actually relying on experience and money management to profit. These factors should be separated from a trading system, in order to justifiably call it a trading system.

Either way, I don't mind they reject it; just don't reject it outright without considering the possibility (or even the reality) that such accurate systems do exist.

If you recall, we talked about the difference between Internal Strikes (before the patterns completes) on the Standard Fall Line -vs- External Strikes (after the pattern completes) on the Fall Line, and how statistically the probability tends to go down for a double-tap on the same Fall Line after that pattern completes. Well, this is a prime example of that only now you have the Fib Fan Confluence to work with to help you figure out where price might like to go "next" when a double-tap on the Standard Fall Line has less probability BECAUSE there has already been an Internal Strike.

http://i59.tinypic.com/10ek4rb.jpg

This is one of those types of patterns that used to drive me nuts when all I had was Version 1.0. The Fib Arcs don't give you the full Version 2.x, but it does give you a tremendous head start on building your own. Notice what price does AFTER it makes the internal strike on the standard fall line. It races for the Confluence Fall Line, as if it were almost commanded to do so. Now, I am not saying that I command the market to do anything - don't get me wrong. I'm simply saying that when you begin to properly layer good indicators at logical points of connection with each other, they almost become uncanny in their ability to help you understand what has the highest probability for taking place in the market "next."

So, this is a really good example of WHY Signal Integration comes with such a premium. It can almost be like having two indicators talking to each other. This is one of my design principles. I look for indicators that dovetail off each other in ways that help me approximate market movement. When I saw that B2i uses two primary Vectors (my term), the O:L and O:H, I realized that those distances can be measured using Fib Arcs. I had no idea where that concept would lead until I began studying the behavior of price in relationship to the B2i structure and the Arcs. The relationship then jumped out at me and from there, I was able to develop additional logic for how to use the information they both gave in synergy.

The Fib Arc Confluence Fall Line can help you with developing an Early Warning Entry level as well. When you see price moving to set the last B2i extension point (either the Lowest Low or the Highest High of the B2i structure), and you see a Standard Fall Line that has not been encroached along with a polar opposite Confluence Fall Line, that indicates that price has a really good probability for making a move in the direction of both levels (Standard Fall Line and Fib Arc Confluence Fall Line). Notice the "distance covered" by the market was between both Fall Lines after the establishment of the Approach Fix (in this case, the Lowest Low).

How do I know that the B2i extreme points (Lowest Low and Highest High) will hold? With Version 1.0, you don't have any empirical input for the Magnitude of price within that B2i structure. This is where the other indicator that I mentioned called Distinct Vega comes into play. Distinct Vega, is responsible for measuring the historical volatility within the Standard B2i Time Frame Structures. That information itself can be used to calculate a probability that each B2i extreme point is nearing completion. Again, another example of Signal Integration and using multiple indicators that are good at doing a specific task and then finding creative ways to develop logic that syngergizes their output for a singular purpose - figuring out where the market goes "next."

This is a bit more advanced discussion of the use of B2i, but I believe you have demonstrated that you can easily handle it.

Thanks and no problem. You are still using the basic Fibonacci Tool. You need to select the Fibonacci Fan Tool instead. That should help.

Thanks for trying to help others visualize things on the charts. I would say that if you are going to make a B2i indicator then you should be able to throw it onto any chart and select any higher B2i structural time frame. So, if you want to attach the indicator to an M1 chart and observe the M30 B2i structures, you would simple set an external variable during indicator load-time to toggle M30 as the Displayed Structure.

You have to remember that B2i is best used as a tactical tool and its Fall Line is very sensitive to the time frame of the structure itself. Ideally, you will want to observe the B2i structure on a lower time frame chart. In other words, you want the chart time frame in which you load the indicator to be less than the B2i structural time frame. That way you can witness how price interacts with the structure over Time.

Hope that helps.