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Trading Basics – A Refresher Part 3

W.D. GANN’S
MONEY MANAGEMENT RULES

I would urge you to go and find Ganns Money Management rules as most of them apart from risking 10% of your account, still apply to this day and following his rules makes complete sense

If you don’t do this then again you are putting your business at risk – up to you – I’m not posting them as those of you that take this serious will head off to obtain

I posted them on this site years ago, too, but can’t remember where

Right – so we’ve got the KEYS to SUCCESS nailed down in the previous posts – If you set the right money management, risk and applied those strict rules then you could trade a simple coin toss – I remember testing this method years back, the rules were:

  • Every MONTH (on the 1st trading day prior to the market opening) I would toss a coin and go long if heads came up and short if tails did
  • I used a % of ATR (Average True Range) for the stop and a preset target of 3 times risk (3R)
  • The system either worked or it didn’t

It did have a positive expectancy and ended the year in profit

A good idea is having this experiment on a chart for a year just to see how a simple toss of a coin (50% probability) can work in the markets – Dr. Van Tharp (our friend) talks of the coin-toss in his book

Before I show you a couple of simple trading methods, I just want to explain a couple of things about the markets

  1. There’s ONLY 3 things a price bar can do – go UP, DOWN or end the period neutral
  2. Markets display mathematical points of force at the major turning points – I just cannot believe that people with a Scientific or Engineering background don’t dominate this industry – A market swing is just but a simple VECTOR point (start and end)!

So How do you view the markets?

UP, DOWN, SIDEWAYS?

You’re FORCED to – all you can view a price chart on is a 2 Dimensional chart – which shows price action moving in a UP/DOWN or SIDEWAYS fashion

When I understood this – things for me fell into place ( you might not be able to see it) – what if price action is actually 3 Dimensional and forced onto a 2D viewing platform – it explains why things aren’t linear and exact

Take the big weekly chart of the FTSE100 Index in the charts previosuly shown in this series – Imagine that from 2000-2003 and 2007-2009 price was coming towards you and from 2003-2007 price was moving away

Look at the chart below – TRIANGLES show up often – Anyone with a high school education knows that Triangles are the building blocks of geometric platonic solid structures

Price reaches the bottom and then reverses – If we could “twist” our view of the action, we would see it clearer

Notice the Triangles, there are NOT square on to our view, they are twisted – this is what causes uneven/unequal time between highs/lows and especially on double / triple tops and bottoms

I’ll leave this for your own research if Interested – but it is perfectly possible to trade highly successfully without knowing this – but it does help to explain those times when your stop is just hit and then prices reverse as you intended!

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Bonus Trade example:

The chart below is a zoomed in view of the chart immediately above, as it shows a highly profitable trading chart formation  – the chart is the WEEKLY chart of the FTSE100 Index

Guess What? As per WD Gann – this method came from the 1930’s / 1940’s period!

All details are on the chart – This trade worked straight away, for the RR even at the 1 app target I’d of been prepared to be stopped out 5+ times for those sorts of returns

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Load of old Bull?????

Here’s the DAILY FTSE100 Chart from 2010, showing similar formation, but the ratios are slightly different because of the 3D nature on a 2D chart – again this one would have offered you a min of 8R return:

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TIP: Notice that these shapes are like “twisted” W’s – because the price action isn’t 2 Dimensional they show up “twisted” on a 2 Dimensional price chart – hence why the range of variance for the end points the swings to form the formation can differ 

In the next post I’ll show you a couple of other high probability trading methods (basic skill level trades)

(I’ve only skimmed the surface there’s lots more methods and techniques that work in the markets – but the key thing is the EXPECTANCY and RISK aspects)

Wishing you well on your trading journey

Stay Safe

THT

 

 

THT NEW MOON Method

On the face of it this might seem totally CRAZY

but, wait……….

What happens if it works?

I’ve spoken at length about money management and risk in previous posts – this method will show you how important it is.

Trades with charts will be produced monthly for verification and the table below updated – PLEASE NOTE, I WILL ONLY BE PAPER TRADING THIS METHOD in this thread – the process is to show you how guessing works out and I’ll be updating the charts and table when time permits me to do so – I don’t have the time to do this real-time

THT New Moon Strategy

 AIM:  To show you the effects of a stupidly simple trading method/strategy where we exploit the R value in our favour and employ strict money management / risk methods, by knowing well in advance the trade direction we’ll be taking as well as the risk and target levels – The LESSON is about managing RISK and money management!!!!

We only have to be right twice to break-even and once will result in a loss of only 6R

If 6R = 60% of your account then you could be in trouble for the next year – for the purposes of this exercise we’ll assume 1R = 2% of your account

So we KNOW right from the off, that the most we can lose is 12R or 24% of our account in a trading year if we get every single trade wrong – this then allows you to trade the following year with 76% of our original trading capital (live another day!)

Wins are obviously a bonus

Trade direction is LONG only (The stock markets have a long directional bias) – I could have spiced this up a bit and used a toss of a coin 5 mins before market open but its another level of faff that I can’t be bothered with documenting

We’ll use the SP500 Index for the exercise – DAILY Chart Time-Frame (charts will be updated)

To break even we just have to be right TWICE out of every 12 attempts – which is handy as there are 12 months in the year

We know in advance trade direction we’re taking, the £ risk, £ profit target and the exact day we’ll be trading – the only thing we do not know is if the market is going in out expected direction too!

1R below could be x% of your account

Let’s trade this for 1 year and see where we end up………………

RULES:

 

1.      Entry is LONG @ the OPEN the day of the New Moon (If this date is a weekend or Bank  holiday then we’ll open the trade when the market next re-opens)

2.      Stop 35 points (this might have to be revised slightly during high/low volatility periods) = 1R

3.      Target is 5 times risk = 175 points = 5R

4.      Once the position is UP 2 x risk or 70 points – stop gets moved to break even

5.      Once the position is UP 3 x risk or 105 points – the stop is moved to protect 40% of any open profits until stopped out or target hit

6.      Every trade will be taken regardless of whether others are still open

DATE
TRADE DIRECTION
ENTRY
STOP
RISK
TARGET
OUTCOME
Cum R value
July 20th 2020  

LONG

3224.29
3189.29
35 pts 175 pts

3399.29
Aug 19th 2020  

LONG

 

 

35 pts 175 pts
Sept 17th 2020  

LONG

35 pts 175 pts
Oct 16th 2020  

LONG

35 pts 175 pts
Nov 15th 2020  

LONG

35 pts 175 pts
Dec 14th 2020  

LONG

35 pts 175 pts
Jan 13th 2021  

LONG

35 pts 175 pts
Feb 11th 2021  

LONG

35 pts 175 pts
Mar 13th 2021  

LONG

35 pts 175 pts
Apr 12th 2021  

LONG

35 pts 175 pts
May 11th 2021  

LONG

35 pts 175 pts
June 10th 2021  

LONG

35 pts 175 pts
 

DISCLAIMER:

As we live in a world and time where you have to warn people who hold a piece of paper and a lit match close together that it could result in creating fire which burns and hurts one – The above is an example only – It is a random method designed to show you how it performs in the financial markets, it is NOT designed for you to trade, anyone trading it must accept losses as their own responsibility and if unsure, do not commit money or trade it – as one thing is for certain, the method will have losing trades and losses of some degree – this thread and post is for Illustrative purposes only

THT will not and cannot be held responsible for any losses whatsoever – trading this example is at your own risk and unless you fully understand the method and risks I would advise against committing money to it

Trade 1 update – price hit 2 x risk so stop goes to break even position

351

Trade 1 update – Price hit 3 x risk so we now trail a stop that profits 40% of open profits

353

Trading Basics – A Refresher Part 2

OKAY – I’m assuming that you’ll read those books, understand about expectancy, risk, position sizing etc as it’s absolutely vitally Important – It’s a massive reason that most people fail – skip learning this and you’re much more likely to balls up!

You need to treat trading as a BUSINESS, most people can’t run a business either, so you have the double whammy of people failing to run a business properly, sticking to rules, techniques, trades when they show up (discipline basically) and a complete lack of understanding for risk and position sizing

If you end up blowing up an account It’s most likely going to be because you’ve ignored running your trading business as a business (discipline and/of following a plan of rules),  position sizing, risk, trade management or the method your trading just does not work and has a negative EXPECTANCY!

You now need to MASTER the charts – I’m a 100% chartist / Technical Analysis Trader – I do NOT look at economic activity, information or analysis – the chart reflects all that in past price data

and when I say technical analysis I mean reading the information off a chart and Indicators – I do not fully subscribe to the traditional technical analysis ways of Edwards & Magee – I suppose I’m what you would call a free spirit! There are some of their methods and formations that I do subscribe to though, so we need a little bit of licence here

We will be basically “reading” a chart – It will be how I read the chart, that might differ from yours – there’s multiple ways to read a chart – just remember, we’re looking to be able to make money fast from it – we don’t need to know why something happened

Chart below is the WEEKLY Time Frame of the FTSE100 Index

In this chart we’re using an ultra simple method of defining the trend – It’s NOT perfect though what about the times when UP transfers to DOWN, Isn’t that hugely Important? Of course is it – Buying in a down trend isn’t a profitable route to take for a short-term trader

But for some this exceptionally simple and easy method could help them to see through the ‘fog’

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Some Use Moving Averages and Indicators to confirm/determine trend

(The MA’s are: 10 Period Simple Moving Average of the H-L price bar, 21 Exponential Moving Average of the H-L (EMA), 55 EMA and 89 EMA)

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Whatever works for you

the chart below is the same FTSE100 WEEKLY chart of a 10 period Simple Moving Average of the High-Low, projected 10 bars into the future

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No one method is perfect – You just HAVE to find out what suits you and you’re style/personality

Or you can show the swings of the market

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Did you know that W.D. Gann waaaaaaaay back in 1909, 111 years agoooooo – wrote trading courses that showed swing trading with the swings I’ve shown above and in the chart below – 111 years ago!

Psst! Shush – Don’t tell anyone, but his methods still work today, in today’s markets – Anyone using swings, swing highs and lows and 50% price retracement levels, are using the same methods he used over 100 years ago!

Did I tell you just how much of a genius that man was? Some of my most treasured trading methods were “borrowed” from his works

This man’s work often crops up in my posts doesn’t! There’s a valid reason why – some of his methods work! (Not all, some)

Remember my post on Ganns Square of nine? – What a genius to have come up with that square root calculator over 100 years ago! Anyway….

What do I use?

Well I use a combination of things – I use the chart that shows the multiple MA’s and the DTF Indicator and I use the swing chart above and the one below (Not all on the same chart, I keep separate charts and I hand draw what I call a “Master Chart”

Basically this master chart is a Daily chart but with boxes around the WEEKLY and MONTHLY price action – just so that I can very easily and simply see the weekly and monthly price bars in comparison to the daily moves – when the weekly and monthly are going up, I take daily buy signals to the long side! Not rocket science is it! (chart not shown)

The swings in the charts below are determined by the software I use and they use market volatility and a special filter based on price action to move from up to down etc – There’s nothing wrong with setting the Blue swing line at say 10% and the Red/Green swing file at say 5% – this means that once price has moved up or down 5% then it will change, so in the chart below we see the swing low point in March 2020, the swing line colour was Red, that switched to green once price had risen by X% and the Blue line in the chart above would have altered its up/down swing once price exceeds 10%

For the Time being just focus on seeing their value as a trend line identifier

(We’ll look at swings later on as they have much much more use than just identifying trend direction – Remember GANN loved his Trend line filter and yes you can use these for trading)

Now my charting software allows me to analyse all those individual swings too – So for any market I look at I can tell you the min-max and average swing size, BOTH the BLUE ones and the RED/GREEN ones – one use of this could be to identify the times of the year the biggest swings happen in, the day of the week with the biggest moves happen on, I could project a price rhythm zone on the chart to show me the price range the next swing up/down should conform to, I can do the same with TIME too – for a trader KNOWING the zone a low or high should arrive in can be exceptionally highly advantageous and guess what? – It throws the laws of probability massively into OUR favour

As is 100% evident – this swing file has captured ALL the swings of the market produced by the price action of the market – we can SEE and we KNOW exactly when and where (price and time) a swing stopped and reversed

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Zoomed in view of the 2014 to present section of the chart above

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But typically I’m looking for a visual quick confirmation of Rising swing lows and rising swing highs for an UPTREND and lower swing lows and lower swing highs for a DOWNTREND

go through the charts I’ve shown you and satisfy yourself of this fact, higher highs and lows etc

Also as W.D. Gann said 111 years ago – When a reactionary swing is greater in BOTH Time and Price than the other reactionary swings in a trend then watch out for the trend to potentially change – its not 100% certain but its good heads up

When price action ventures into the range of the previous swing, then it muddies the water and that’s when trading ranges can form

Gann also said to trade Double and Triple bottoms/tops etc – how easy is it to see those formations when you have a swing file on showing the swings! Answer = VERY easy

(As a bonus, I don’t plan on showing you – but I trade those Double/Triple patterns and more for some very high R profit values and returns)

Remember you can use whatever suits you to determine trend – I’m just showing you what I’ve found most useful – Remember “We’re here to make money from the markets, and that MEANS being RIGHT”

I mentioned swing file analysis – this the the SP500 Index swing file since 1962 – Used in the right way you can us the stats to trade from to your advantage!

I have NOT tweaked the swings, I’ve just let the software select them, so there’ll be a couple that you could refine to make the data more accurate – but for the purposes of this example, we don’t need to – it’s good enough as an example.

All about having the right tools to trade with as you wouldn’t expect your builder to build your house with a tea spoon and knife!

Remember its important to know and see the bigger picture here too

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As you can imagine it takes time to produce these posts so I won’t be posting for a while – as you enough to digest for the time being

And when you take price action away the swings become even more clearer

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You can use the big swings to your advantage in knowing the average size of the swings and the duration, because they are likely to happen again in the future of which you can profit from and they take time to develop and form

I’ll do a separate post after this education series has ended on trading the big swings

Stay Safe

THT

Trading Basics – A Refresher Part 1

Lets have a refresher of the Important aspects of TRADING

Be prepared because this is purely BORING but it is

ABSOLUTELY ESSENTIAL

 

KEY point to note = MOST of the **** out there on trading  DOES NOT WORK – Its why you’re not making much money from this

That’s right most of the junk you’re taught in manuals, courses, books and online – just does not work well enough for you to make money from it properly

Its most likely one of the main reasons why 95% of those that try to trade fail and lose their account – I’m guessing here as I don’t know for certain and I have no plans to spend time Investigating – I’d rather watch paint dry than waste my time doing that.

 

FIRST POINT

Do you KNOW the EXPECTANCY of your trading method?

If you don’t know or don’t know what Expectancy is – you need to STOP right now and go look it up, digest it, swallow it and be able to recite it in your sleep – it is CRITICAL to you’re success

If your trading method has a NEGATIVE Expectancy – you are going to lose and you may as well just buy and hold/Invest

I would recommend a sample of 100 trades or more to arrive at your expectancy figure

 

SECOND POINT

Get a copy of Dr. Van Tharps “Trade your way to Financial Freedom” because you NEED to UNDERSTAND the LAWS OF PROBABILISTIC RETURNS and probability

His book also covers POINT ONE above too!

 

THIRD POINT (There’s going to be lots of points!)

There’s a lot of boring stuff before we get to the good stuff I’m afraid!

If your method results in a negative expectancy – DUMP IT

FIND A METHOD THAT ACTUALLY WORKS

The Turtles had a very very successful trading method but it only worked 30-40% of the time – the system had a positive expectancy but you’d lose on 60-70% of trades take, this leads on to POINT FOUR

 

FOURTH POINT

You NEED to use and find a trading method that suits YOU, but more importantly your PERSONALITY

I love to beat the market, I love having one over on the market, I love finding the lows and trading them (Yes it can be done)

But, I’m also a very very very very (how many can I write?) bad loser – I hate it when I lose, I’ve managed to learn how to handle it – but I hate losing

So I HAVE to have a high win rate system/method as it helps me to cope with fewer losing trades

Now If you’ve read Dr. Van Tharps book I mentioned in POINT #2 – Then you will know that to have a high win rate system comes at the price of not having a higher R profit return – for me this is perfectly fine – as my main personality type for trading purposes is to WIN

Now in real life away from trading, I could not careless about winning – I don’t need money or things to make me happy and I certainly don’t need to be the best or most popular, but when i trade I need to win often

It would also be worth your while reading Mark Douglas’s “Trading in the zone” too if you’re reading Dr. Van Tharps book as the content is crucial to your success believe it or not.

 

FIFTH POINT

When I have a losing trade – I throw something, swear at the chart/screen, swear some more and that’s it

If I have a loss when the market just, just, just nips my stop loss and then goes on to do what i was expecting – then I lose it for 5 mins and I’ll go for a walk

But ultimately I realise, accept and understand that I AM 100% RESPONSIBLE FOR MY TRADING AND EVERYTHING THAT GOES WITH IT

If you don’t accept responsibility you will blame everyone but yourself and when the game is simply win or lose if you can’t accept that walk away – if something is not perfect trading wise, you HAVE to come up with a solution yourself

I know that I’ll have losing trades – it does not mean I have to accept them as all the trading books say, they gnaw away at me

But I still take the NEXT trade

SIXTH POINT

RISK – this is huge – You need to understand RISK – again Dr. Van Tharp’s book mentioned above covers all the risk permutations – all aspects of trading are Important

We’ll cover risk management of a trade later on but for now this is mine:

  • I risk between 0.50%-2% per trade (Depends how many positions i have on, my total overall outstanding risk in the market etc)
  • That 2% is of my trading account – so  if my account is £10k then I risk £50-£200 per trade – end of story, simple as that
  • I class this 0.5-2% risk as 1R (1 x risk)
  • Trading this way lets you live many many days until the fund is gone

Here’s a theoretical example:

I find a set-up, the ENTRY is 100p, I work out where my stop is going, at say 85p – 15p is at risk (I call this my range of risk) so this 15p is 1R

So this 15p range of risk is 1R – on this trade I want to commit and risk £200 or 1R of my trading capital of £10k – £200 divided by £0.15p (15 points) = 1,333 shares to be bought or £13.33 per point spread bet I can place (if margin permits)

That’s it – if I’m wrong (barring a gap or slippage) if I set that trade in like that I’ll lose £200 if my guess, bet, gamble of direction of the trade is wrong and as I KNOW some of my trades will NOT work I’m prepared for this and happy to risk that amount of money

We’ll look at where stops should be placed later on

Someone asked me if I’m so confident on a trade why I don’t bet 5 or 10% – I DO go to 5% risk, not 10% though, but only on certain trades where I’m happy with the risk level, these tend to be buy and hold positions that I plan to hold for weeks and to get into the position that sort of stop is required

You HAVE to MASTER RISK too – if you’re risking 10% per trade then 10 consecutive losing trades and you’re out of the game – at 2% you need to lose 50 times to be out of the game

The above risk assessment is simple, but very valuable

REMEMBER – We ARE Gambling, but trying to exploit market anomalies

You need to minimise risk and maximise potential

I’m coming at this series from a small account point of view to grow it – Based on the above, when you have a £100k trading account then, it’s very easy to hit the following figures:

  • Risk only 1% = £1,000
  • To make a 2R profit return = £2k
  • Now most people could live off that, so people could if they wanted to reduce risk to obtain a decent income – its why I mentioned risk of 0.5%-2% – up to you, the bigger an account gets the less risk you can afford to take
  • It is definitely possible to make 1R per week net profit, which if this is at 1% risk then its a 40% profit year, if you trade a 40 week year – which smashes out of the park buy and holding, even getting half this amount smashes buy and hold over the long term – remember this interest is compound as well
  • The pressure is off

This does not mean that every week you make 1R profit or whatever, you might make 10R profit on a trade and no other trades show up until the 11th week – When we get into it, you’ll see that I trade what the market gives, not what I want from it

 

SEVENTH POINT

We ONLY trade when our method shows up

The rest of the time we do something else – we do not trade, ONLY when our method or methods (I have multiple methods I trade) (that we know works because we’ve worked out the EXPECTANCY) shows up on a chart – we ONLY trade once we are 100% certain the set-up/method is in place

We make sure that our methods have the deck of the cards stacked in OUR favour and not the houses – which is perfectly possible in trader land

This means that you ONLY trade your method when it shows up – Imagine that you’re trading method is a RED car – you’ve listed the rules to it and know EXACTLY how it looks on a chart – Now Imagine 1000 cars driving past your front door, the only time you’re going to take your wallet out if when you see a red car and when you do you might get £/$50 shoved in it or sometimes £/$10 taken out of it – If you did this on any of the other coloured cars passing it’s most likely that £/$10 will be taken out and lost – Any sane person is just going to sit quiet until a red car passes and then out comes the wallet, at all other times it’s firmly wedged in the back pocket

That’s exactly what you do with your trading method – only trade it when it definitely appears on a chart

More to come in the weeks that follow – it will give you chance to read those books!

If you really really really want to be able to trade effectively for a living then you HAVE no choice but to follow the rules – BUT, there are some “rules” that can be ignored!

That does not mean doing absolutely everything that you read about in the guides, manuals or books – Hell man, the ONLY time I’ve had a Trading “Journal” was when I was back testing and testing a presumed trading method – so that I could work out expectancy etc – I do NOT keep a trading journal, I know from the trades I’ve taken whether I’m up or down – I KNOW my methods work because I went through the pain of testing them years ago

and I know that if I trade them over the year I’ll come out on top – I just have utter faith in the techniques and methods I use and I don’t see the value in wasting minutes recording the trades, into something that I’ll never look at

We’ll get into the nitty gritty from now on in the weeks to come

READ those books!

Until next time

Stay Safe

THT

This weeks SP500 Resistance – WD GANN

Hope you’re all staying safe – world sure is a hot bed of activity at present right across the globe

You know with the markets NOTHING is 100% certain – the markets can be really complicated and also really simply

I would thoroughly recommend that you read as much of WD Gann as you can – WD Gann wrote many trading courses – you have to read, reread and then reread them for them to simplify – I will be honest Gann hid true meanings in simple words, so if you are reading his courses hoping for mysteries to be told, you’re mistaken, he forces YOU to do this yourself! Which due to the avenues and work involved will demand a huge amount of time of you, which most people don’t have – then you have people trying to charge you £1,000’s for trading courses to “reveal” the truth!

In all respect, you can do it yourself with a little application and hard work – nothings free in this world!

I still use a lot of Gann’s simple trading methods to this day – used properly they make very attractive returns and I mean much better than the Industry standard 1:3 risk:Reward returns – these are ALL contained in his works with no hidden mystery, you just have to test them and use a bit of common sense around

Now the below is COMPLICATED beyond belief, but you can do it on a calculator!

What I’m about to show you is just ONE aspect, you can use the calculator below to do many other things on Price and Time

Gann in his courses writes about the Squares (9 & 12) no-one knows where Gann learnt or developed this but he did spend time in London, India and Egypt – I would bet this came from Egypt

Take a look at the image below – this is Ganns square of 9 in basic form – notice the angles!

TIP: Pull the 1 towards you in your mind and it will form a pyramid shape (hence why i think Gann got this from Egypt)

Sq 9

Now take a look at this Square of 9 is more in-depth and detailed – do the same imagine it as a pyramid shape

I’m not going into exactness here, you’ll just have to believe me, but all those numbers are perfectly formulated, notice the circles perfectly intersect some of the numbers and also perfectly hit the apex of some of the squares too – this is not by accident!

Now you are probably looking at this (if this is your first time seeing it) thinking “WTF?”

Simply – the Square of Nine splits the circle up into various angles, through 360 degrees, those lines land on numbers and it can be used a yearly calendar, with the angles hitting Spring, Summer, Autumn and Winter etc

this post I want to focus as simply on the numbers as possible:

Basically all the numbers you see (which can be both TIME or PRICE levels) are SQUARE ROOTS – If you know maths then you should see a lot of coincidences in that square of 9

Look at the “blocks” if you follow price around the square from 1 it spirals – look north from 1 until you come to the number 316, just before the circle moves into another circle.  The next number on that north line is 391 (the north line is in fact the 90 degree line, if you read Gann he refers to things as 90 degrees, days, weeks, months, years) here its the 90 degree line

(0 degrees is at the 9 o’clock point, 90 degrees is 12 o’clock etc)

Now back to the numbers – there is a point to all this!

Take that number in block 9 (316), sq root 316 = 17.776

to get to the 391 number in block 10 all we do is add 2 to the sq root number of 316 = 2+17.776 = 19.776

Then we re-square the number 19.776 x 19.776 = 391

so to move upwards number wise from block to block we add 2 to the square root and then re-square

Stick with the 391 number if we deduct 1 from the sq root number it shoves us southwards to the bottom part of the square of 9

391 sq root = 19.773 – 1 = 18.773 x 18.773 = 352

Now to move in other directions all you have to do is add or subtract by different ratios to get  the other angles on the chart – so sq root + 0.25 – try it

use 391 (19.773+0.25 = 20.023 x 20.023 = 401

Find 401 on the chart

what you have done is by adding 0.25 = 45 degree line, so by re-squaring 391 with 0.25 you find the number associated with that number on the 45* angle of the square of nine! Pretty jazzy eh!

Now to be accurate 45* added to 90* = 135* angle of the Square of Nine (see coloured chart above)

Now in Ganns courses he constantly mentions angles, degrees etc – you simple alter the addition or minus ratio according to what angle you wish to locate/find (remember adding 2 to the sq root moves you a full 360* on the square of nine)

This IS what Gann WAS using 100 years ago! 100 years ago!

Square of 9

Now, here comes the relevance:

The chart below is the SP500 Index

I’ve had the following BLACK line on this chart for weeks

Take the LOW PRICE of March 2020 = 2191.86

Now we’ll apply the Square of Nine to that number – As we’re looking for a possible RESISTANCE LEVEL we need to be adding 2’s to the sq root figures to move up in numbers and up the block on the sqr of 9

2191.86 sq root = 46.817

46.817+10 = 56.817 x 56.817 = 3228.18

This is the 10th block on from our 2191.86 low price level

Now look at the chart below – here’s a caveat – I have to manually draw these lines on – the 3226.57 black line on the chart was the nearest I could get to placing the 3228.18 line on my charting software due to the limitations of tiny movements on the mouse

Now Look at the chart and the HIGH price of 3233.13 is ONLY 4.95 points over – How amazing is that?

You could have done some time forecasts using time on the Square of Nine and or Gann Angles to see if Time on the 10th block balanced (I’ll leave that for you to do)

Note – It is impossible to know which block will provide support/resistance – you have to test test and test as price moves along

Just wanted to give an illustrated explanation for the most recent decline in prices

Now using more traditional methods – Notice the 2 period RSI at the high – divergence @ a key resistance level

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I am pretty sure that more intellectual minds have dissected and written books or courses on Gann’s Square of Nine – As I’ve not read any I can’t help you in which sources to refer to or not to use – All I’ve done is stripped Gann down bit by bit and tested when I could, I’m sure there’s some bits I’m sketchy and not knowledgeable on, that’s for me to look into or leave alone

Stay Safe

THT

My WEEKLY Market Analysis

Hi All,

Good health to you all in these scary and uncertain times – stay safe

I’m not sure that I’ve shown these charts on here – This is what I do EVERY Saturday am when I review the week gone and look ahead at the week ahead

I’ve done this ever reading John Carters “Mastering the Trade” book and I had the pleasure of talking to him over coffee, twice about his methods and especially the clear, mental thinking required to be a trader – once in Las Vegas at the Traders Expo in 2010 and then a couple of years later at the London Traders Expo

The charts explain everything and my current thinking – I am 100% flexible to moving my thinking if during Monday the markets completely goes against my outlook!

Have a look at the charts and my words – On Monday morning it literally takes me 10 seconds to scan each chart to reassert my Saturday morning analysis – I also do this same analysis for the FOREX markets that I trade, so that I have an inkling of possible market direction according to the MONTHLY/WEEKLY & DAILY pressure

Remember this outlook might not be correct but it’s what I personally currently “SEE”

I personally trade most of the stocks that make up the FTSE250 Index during the year, so I want to know the most probable direction of that Index so that I can place trades with confidence

FTSE250 Index MONTHLY CHART:

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The MONTHLY chart lets me see the big picture

FTSE250 Index WEEKLY CHART:

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I’m not a great one for support and resistance levels as I’ve seen too many supposedly S/R levels crumble – BUT, on the WEEKLY chart draw a line from Nov 2016 swing low across and it hits the Time Cycle low of Dec 2018 within pennies! It could create a resistance level just under the 50% red retracement level shown on the chart around 17060 level.

Previous weeks I’ve shown you PIN/HAMMER Bars – look on the WEEKLY chart for them too! Notice that at most turning points they are present.

FTSE250 Index DAILY CHART:

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A break of the triangle to the bear side INVALIDATES the triangle potential for me – I’m already in this trade from a previous trade set-up confirmation so it’ll be interesting going forward

My next job is now to look at the FOREX markets and the Individual stocks of the FTSE250 Index that I trade to see if any of them have formed any of my trading set-ups

Stay and Keep Safe

Gann Pullback

This is an ultra easy trading method, first published a century ago by WD Gann

This method is named after the legendary trader and publisher and as you can see it still very very much works in today’s high octane, algo, markets

This is a staple of my trading methods – Details below chart:

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TRADE 1:

Left hand side of the chart – GBPUSD Forex market 10 Min chart

Up trending market, Moving average spread/fanned out nicely in perfect order

2 bar pull back with lower lows and closes without closing below the 10 (RED) SMA, then the 3rd bar was a narrow range inside bar WITH a 2 period RSI bullish reversal from very close to the 25 line = High Probability trading opportunity in place

The Inside bar is the order bar, you set a stop 1 point below the low of the inside bar and your entry order 1 point above the high of the inside bar – approx range 4 pips

Risk is according to your rules

In this type of market I usually just go with a trailing 1 bar low stop loss – 80 minutes later the trade was exited for a very healthy profit

If the market is trending then you have to expect price action like this to occur

The Inside bar is what makes this a very high probability trade potential

TRADE 2:

Far right of the chart – Same market, the next morning 10 min chart

As you can see the overnight market held the moving averages in perfect order

We then get 2 red pull back bars above the 10 SMA, the next bar is a green bar with the 2 period RSI ticking upwards = time to place a trade

Stop 1 point below the low of the green set-up bar and the entry 1 point above the high of the green set-up bar (As you can see we are risking 1 bars range) – approx range 12 pips

Market goes off and its a trailing 1 bar low stop

This trade due to the range of the entry bar was not as profitable as the 1st trade as that entry bar was a nice small narrow range bar

It’s ultra important to wait for buying signals and not just buy blindly

Market has to rise with the SMA’s in perfect order, then a 2-3 bar pull back towards but not  a close below the 10 SMA = Potential trade

the trade is confirmed with an acceptable range trigger bar that forces the 2 period RSI to tick upwards (This is even more perfect if the tick up points on the RSI occurs from under the 25 level)

Now look at this one that wasn’t quite right:

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1st potential it didn’t really pullback properly – it still worked as it was a half decent inside bar (In fact it is a Boomer (3 Inside bars set up), and requires differing rules than a Gann pullback

2nd potential the 10 SMA is too steep, but more importantly the green bar following the 2 red bar pullback was just far too of a wide range bar to even consider the trade, so although it all set up fine, the range of the bar stopped me from placing an order – if the range of the green bar had been similar in range to the previous red bar on the 10 SMA line then i might have had an order placed

You could trade the 2nd pull back bar without confirmation, but for me this is too risky – I like as much upside potential as is possible and that is provided by the bar sequence along with the RSI – which is my safety net

Just trade the picture perfect set-ups and let the risk takers take on all the other less than perfect trades!

Good luck and Stay Safe

 

The 15th March 2020 Time Cycle

Well, well well………………………….

It’s been an eventful few weeks on the markets hasn’t it!

As published waaaay back in June 2017, we’ve been in the zone for the March 15th 2020 Time Cycle due date

CHARTS SAYS IT ALL REALLY!

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Then this happens:

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Not all these cycle dates will move markets – but some of them will, I’d rather know well in advance when the market could become a little bit “iffy”, rather than not knowing at all

I have a personal opinion on market outlook for the rest of the year based on a couple of differing factors – will post April/May time 2020

I also have some other interesting stuff that I need to post as it’s important to the Time Cycles Analysis – Watch this space next few weeks

In the meantime, all the best and good luck

The HOVIS Trader

REMEMBER: 

These Internal cycles are not exact date specific, they have a tolerance of + & – 3/4 weeks around the actual exact cycle date published

It pays to be aware of potential market sensitive points/dates/zones 

The BIG Time Cycles drive the whole show, never lose sight of that

This means you have to trade/Invest according to a plan that you have for yourself

It does not mean that the cycles cause price to rally/fall into the next published cycle date – that just does not happen with these internal cycles (the big cycles it does though!)

We are looking for potential increased market volatility in these Time Cycle zones (Which is exactly what we got on this one!) – It is IMPOSSIBLE to know for certain whether a TC will be a high or low

I’m not revealing the actual cause of the cycle

I trade according to my trading methods and set-ups, if they show up i trade, if they don’t I don’t – I do not trade the cycle date(s) blindly with a buy or sell order, a trading set-up of some kind acceptable to me has to appear for me to get involved – There’s a few spanners out there who think I can predict price action on the exact cycle date and make a killing! It doesn’t quite work like that in reality

 

 

 

Basic to Advanced Timing Methods

In light of recent market activity, I thought I’d do a quick post on the basics of timing for those of you that don’t use Time Cycles etc

Please note that the TIME CYCLE caused this drop!

But EVERYONE can either with a calculator or a decent charting software program, work out everything in the below:

The Chart is that of the UK market (I’m in the UK) FTSE250 – this market represents the UK better than the FTSE100 Index and it’s much much more punchier!

We are calculating where the LOW point could come in

Overall view of the FTSE250 WEEKLY chart – swings and timing calcs

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In the WEEKLY chart below:

We take the ranges of ALL the swings of the market for the past 11 years (from the 2009 low) and then we simply calculate from the marker on the high a lot of standard trading days and calendar days counts, Fibonacci time projections of each swing and mix them all up together – this is the window marked DTP

DTP = The highest count for this was the week of FEBRUARY 7th – as you can see on the chart this week WAS a mini-swing low, so it worked, it picked out the week of the 7th Feb as being some form of low point (you can see how trading/Investing blindly would have cost you here as the low came in, it just was not THE low!) – This is one of the risks of trading/Investing

I’ve also taken a very very simple trading range projection of all the swings in terms of how long they lasted and shown in the top Indicator window named TRZ are the date ranges – These calculate High-Highs, High -Lows, Low-Lows and Lows-Highs of all the swings in the chart

TRZ = On the chart there’s 3 date ranges – the BLACK range is where BOTH calculations – the date range here is to expect a low between 10th Jan – 21st Feb 2020

As we can see it also covered the period of time week containing the 7th Feb! and it also worked

These basic timing methods just pick out the most likely periods of time based on PREVIOUS swings of the market, once the market changes the degree of swing, then as we have seen all previous swings are basically redundant!

This change in energy catches most people out – This is why these systems are imperfect and you cannot rely on them solely – the good news is that a change of energy does not happen for long periods of time in between so you can use them, but the big caveat is “Always be prepared for a change of energy”!!!!!

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Running EXACTLY the same reports but on the daily chart:

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Zoomed in view:

TRZ = 22nd Feb-15th March 2020 overall – notice that the black overlapping section has already been and gone so that now has to be ignored/discounted

DTP = Is suggesting Monday 9th March has the most hits on timing 

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If Timing the market were this easy for all turns then we’d all be very wealthy – as we can see there’s an ART to timing methods such as the above, but they are not science at all – I prefer MARKET FORM over these timing methods, as I simply wait for the market to let me know if the bottom could be in, rather than a date, time or cycle – use the TWO in combination and you start to have a WINNING formula

Remember the actual date of the more preferred TIME CYCLE is 15th March 2020 – no guarantees as to if the market will do anything on this given date – the Time Cycle has already worked as it’s caused significant market volatility in the build up to the cycle date

Good luck and stay safe

THT

How to BEAT the markets

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Thought I’d add a bit of visual aspect to the post!

Forget about time cycles (although they do dictate market direction!) and forget about all the reasoning why a market should/will rise and just keep things exceptionally simple

Just how do we beat ……

 

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I firmly believe that if you trade rather than invest then you CAN beat the market – by how much depends upon how little or often you trade.

 

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This is some of my past weeks or so activity

GOLD – 5 Min chart below – Defined trend (moving averages all well placed, good distance apart and smoothly rising) in place following a bear section, looking for a GANN Pullback (1-2 red bars), followed by a green INSIDE BAR, The Inside bar has to have a bullish RSI move and or a tick up (the tick up happened on the bar prior) = Trade set-up

Entry was just above the high of the Inside Bar and stop just below the low of the same IB

Exit is to trail the swing lows – you confirm a new swing low once a swing high has been CLOSED above the high of the swing high

You don’t need me to tell you that this produced many R multiple

NOTE: E = Entry Bar, my order was set on the bar prior as that was the set-up bar, it just didn’t trigger, then as everything was still the same on the formation of the next bar, I simply revised my entry & stop level to suit at which point it triggered – if it hadn’t of triggered the order would have been cancelled

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Here’s another similar on GBPUSD 5 min chart – see chart below

Notice the 1 bar Gann Pullback

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Here’s a messy one – EURUSD 5 Min chart – see chart below

Waiting for trend to establish itself, but it wasn’t clean, then an Inside Bar along with a RSI2 tick upwards = most likely last fling upwards (which is was)

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Remember if you’re risking 2% of your account per trade then 2% = 1R

These ultra simple methods work and they are highly profitable – you can see from these that they were all very worth while trades

No waves, no cycles, result was 25+% profit in a week