Info!! Where Does Marketplace Border Come Upwards From?

Above is a screenshot from my trading station, capturing some the final viii days of trading inwards the ES futures, using hourly data.  Volume is on the X axis.  Below book is a two-period RSI that is a really brusk term stair out of overbought/oversold.  Above book is a linear regression work (red) amongst bands of ane criterion divergence (blue) higher upward too below.

The nautical chart dainty illustrates how markets are a articulation share of linear tendency (the regression line), amongst ane or to a greater extent than cyclical functions overlaid (the movements from upper to lower bands; the movements betwixt short-term overbought too oversold).  Notice how oft the marketplace volition accept out a prior depression or a previous high, entirely to bicycle dorsum the other way.  It's a expert instance of how traders who recollect primarily inwards price of breakouts, momentum, too directional trends boot the bucket "chopped up" yesteryear the market's cyclicality.

Much of the frustration from trading comes from the imposition of linear thinking on markets that get got meaning cyclical drivers.  During stable marketplace periods, nosotros tin "solve" for dominant cycles too and hence usage motility higher upward too below the bands to seat when stability is breaking downwards too we're entering a dissimilar cyclical or directional regime.  The regard is *not* to merchandise according to your personality.  The regard is to capture the linear too cyclical components of markets too merchandise the market's personality.

If y'all boot the bucket the basic regard of interacting trends too cycles, y'all tin run into why the next has really express edge:

*  Chart patterns taken out of context;
*  Oscillator readings taken out of context;
*  News "catalysts" taken out of context;
*  Breakouts taken out of context;
*  Wave counts or Fibonacci patterns imposed on markets;
*  Releases of cardinal data

So what does get got edge?  In my experience, it comes from identifying when 1) the herd (which thinks one-dimensionally inwards price of linear/directional movement) gets trapped at bicycle extremes too 2) when shorter-term "mean reversion" traders boot the bucket trapped yesteryear the momentum components of longer-term cycles too trends.

What has border inwards the quant globe is the dynamic modeling too re-modeling of shifting cyclical too directional components of markets, rather than static, curve-fit models based on lookback periods.  This is a large argue why funds that brand usage of truthful Cycles

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