HAC & RAC - A Simple-Minded Approach

Benford Lesson #2

At first I only used the #1 because it was the most prevalent and moved around the most. I began by seeing what would happen if the #1 got really far away from its ideal level of 31.8% but it was not clear enough to trade from. Oftentimes when it did reach and stay close to its 'ideal level' of 31.8%, the market would just stop moving.

But this told me something as well. It told me that without "big money" and highly dominant players overtaking the the "natural order," markets will not move much. We need these folks. Problem is, they expertly mask their operations. You will NEVER see their actions in the volume or in anything else. That's how good they are. Make no mistake. They are the BEST at what they do. They spend millions of dollars on salaries, the most powerful computers and the brightest and best minds in order to maintain an edge. Whatever you think you see of them is because they want you to see it.

God bless em!

I don't know who these heavy hitters are. It could be various banks, large hedge funds or whatever. The "who" isn't important. What is important is that these folks invest enough capital to obliterate the "natural order" of the markets. The capital outlay must be considerable indeed! It would have to be in the billions.

We want to trade on the same side they do. Their capital outlay is considerable; therefore, their reasons for putting on positions where they do are considerable as well. Let them do some of our work for us. Let's use their research and opinions.

Finding the Ideal Extremes

Since the distribution of numbers are seldom at their ideal levels, another means of finding "unlikely events" had to be found. There had to be a reliable, yet frequent enough of an event to be of use.

This is why I finally landed on the intersection of #1 and #4. Recall earlier (and in the chart in the previous post), that the #4 should occur around 9% of the time. To have #1 and #4 intersect is a very unlikely event. Either #4 has to increase by 22%, or over 200% its normal distribution, or #1 has to decrease its normal distribution by roughly 72%.

Benford Lesson #3

Here are questions... very important questions to ask yourself at all times:

The first one is:

1. If I had a billion dollar position to put on and it would take me at least a few hours to accomplish it undetected, what would my strategy be?

This leads to the second & third questions

2. Could I hope to get the bottom or top tick on the whole thing?
3. Should I buy close to where I think the bottom is or sell close to where I think the top is?

Once the position is on and has run for a bit, questions 2 & 3 present themselves once again in a different form:

4. Could I hope to take profits on the bottom or top tick on the whole thing?
5. Should I take profits and buy close to where I think the bottom is or sell close to where I think the top is?

Remember, these folks have a huge task ahead of them. They think in terms of overall context and can't afford to be overly concerned about precise tops & bottoms. Remember, THEY move the market. They ARE the liquidity. There IS nobody else to take the other side of their entire position. It has to be spoon-fed into the market. Learn to think in these terms. It's important.

Example #1 GBPJPY

In the chart below the GBPJPY had gone just past a 3x target from H1 after a considerable run up. There was also a 1-4 cross and recross. Once the white line (#1) starts to move up and away from the orange (#4), I consider the trading program to have completed. Wherever it completed is where a new key level will be established. It will often be "masked" in one way or another, but if the other HAC & RAC rules are followed and considered, you will not be fooled.

Bear this in mind: These large players MUST get people to take the other side of their trades. Therefore, they will go with the tide if possible. Remember always what the HAC lines represent. They are various moving averages, which are the tides of the market. The RAC is the momentum toward one side of the tide or the other. By themselves, they are reliable, but now we can see where the liquidity really is.

Do you think this big trader activity is toward the long side? Not a chance! What fool would put billions into a market that's already moved?

Example #2 GBPJPY

A few hours later there was another crossing. Look where it is! Right on the red HAC line. Also, the RAC is giving a picture-perfect signal.

Example #3 GBPJPY

Now that a short trade is underway, we look to where the big guys might be starting to take profits. It's unlikely they're putting on long positions because they like to have a little momentum on their side first. They like the market to move around in confusing patterns and get in as close to their intended level as possible.

Anyway, the first recross happened very close to a 2x level, which was profit taking for sure. The second cross happened close to the 3x level - a level that will not likely be surpassed. With the liquidity gone, how far can it really go?

Example #4 GBPJPY

There was yet another cross just a few pips above the 3x level. This happens to coincide with a major swing low on the H4 chart.



I realized something pretty important. It's possible that the recrossings of the Benford indicate more positions being put on. They occurred in the same place that the HAC line on H4 was crossed. It gave a perfect signal, so let's be sure not to go long until there are good signals from the HAC & RAC telling us to do so. Where I circled is where the crossings happened on M1 and the H4 HAC line.

Now because H1 has reached a major profit target, the market might have to swing back & forth a bit before it heads down more. Or, if it does reverse and go up, the H&R will let us know.

Hey Moonie,

Here's an indy I got some time ago. It shows the daily open. I used it a lot to experiment with the trendline approach I mentioned a while back.

Example #6 GBPJPY

There's something big going on here boys. Keep your eye on this area. Several crosses in the same area generally means some kind of position-building. Plus it's really "quiet." Those are the best.

So you think it's best to find the Benford crossings on the M1 chart if your trading the H1 chart? What about if your trading the H4 chart, should we look for Bedford crossings on the M5 charts? Same with Daily, Should we look for Bedford crossings on a lower time frame? And what settings for the should we use for the Period 1, Period 2, range multiplier, range divisor should we use for a lower TF chart?

Good questions Timo!

I'm glad you asked these because I want to underscore again what's being measured. We're looking for places where the biggest money is doing something significant. Their 'programs' will have a beginning and an end. With that said, we have to consider a couple of things:

1. Sample size - there has to be enough periods to obtain an adequate numerical sample.

2. Time - The actual time, in terms of minutes/hours has to be short enough to capture the effects of their buying/selling. Too long of a time will obscure it IMO.

Personally, I like M1 over M5 because it shows multiple hits in the same area. M5 oftentimes does a 'touch n go" and that's it. It's just easier to see on M1. At significant levels though, they occur together. Usually, when M1 has multiple hits in the same area, there will be an M5 anyway.

Bear in mind that those market participants aren't interested in grabbing just a few pips. These are significant moves that are under development - ones that easily run for days.

With regard to the settings, use the template I provided. It's set up to put two instances of the indy into one window. Also, the scaling is adjusted to match up both instances. I think the template I gave is set to 48 periods (ideal for M5), but if you use an M1 chart, set period 1 to 60 on both instances.

Here's what the settings actually do:

Reference: This is a selection to either use the range, volume, or range x volume. Use range x volume.
Period 1 : This sets the number of periods for the sample.
Period 2: This is a second sample size to look for. (I used to compare D1 & W1 sample sizes and see their relationships) - don't bother with this (the default is to have it turned off). But be careful to have it set to a very low number. Otherwise it takes an enormous amount of calculation
Range Multiplier: This multiplies the range to get it out of decimals. I was afraid that if it was multiplied by the volume, it might not be right. The default is 10,000, which is high enough to accomplish this for all currencies
Range Divisor: Originally I thought that some currencies might require dividing the range by a certain amount and then running the analysis on them, but this isn't the case. The default is 4, but set it to 1. (Again, the template is set up properly)
Leading Digit: This is the leading digit being looked for. The indy counts the number of occurrences.
Disable_Average 2: All this does is turn on off the results of Period 2

At some point, I'll ask FerruFX to add the second leading digit and remove Period 2. That way, we will have only one instance of it running. Meanwhile, please use the template. If you use M1 though, I would change the period to 60 on both instances.

Thanks Almuten you are always so good and thorough with your explanations and answers.

Wouldn't it be good if we could set up a team of us, scanning all 25 or 30 currency pairs, just looking out for these big moves!

I think it would be tremendous and a lot of fun! It will take some time and getting used to, but we'll get there.

And if we look at the chart in a form?

Now I've made some indy that shows difference between current TF red HAC and higher TF green HAC (see post #306).
And Weekly Open Line. Enjoy!

Hey vvFish,

I'm not familiar with looking at a chart in a "form." Please explain.

Also, I'm wondering if you're on a demo feed on the chart you displayed or maybe the scaling is different on the indys. The Benford looks a bit different. It seems to be making similar patterns to mine, but the lines aren't touching at any point in that last consolidation pattern.

There should be two instances of the indy and the scaling has to be identical on both of them. Otherwise, they might never touch. I set the template to .01 for the minimum and .6 for the max.

Hey Rammstein,

Thanks for posting that! I will play around with it so on. I do have one question though. Is there a reason you put "2" for a level in it? I'm just wondering if there's something I don't understand about it, etc...

Thanks for the contribution!

I think it is always important for a trader to know when the news,
indicator set at the chart folder with the sounds of the sound set in the terminal folder.

Hi, Almuten!
There is no level "2", there is just level "0". I don't understand - what are you talking about. And I see just level "0" in indi window...
Excuse me for my english, please.
And I have to note that M60 (not M30) is higher TF for M15. The M60 is higher TF in my indy for both M15 and M30, cause I don't use M30 in my trading by this method.
And, cause MN1 is highest TF, don't use Delta HAC on it.
DeltaHAC helps me to see aligning of TFs. Now I wait great move on #NIKKEI, cause M15-H1-H4 are aligned (Delta HAC are about "0" on all three TFs).

Hi, vvFish!
Are you sure that timesessions are correct in this indy?

my friend, I have everything working correctly.
once again watch the video installation.