JOURNAL THE ERGODIC TM CANDLESTICK OSCILLATOR ROBERT KRAUSZ'S. Volume 1, Issue 7

Transcription

1 ROBERT KRUSZ'S JOURNL Volume 1, Issue 7 THE ERGODIC TM CNDLESTICK OSCILLTOR S ometimes we re lucky (due to our diligence) nd we find tool tht is useful nd does the jo etter thn previous tools, or nswers tough questions such s: How do we solve the prolem if we re trding intrdy nd the mrket hs gp opening? Most oscilltors tke time to ctch up fter gp opening, nd the trder hs to wit for numer of rs to pss efore the oscilltor ecomes vlid gin. My friend Bill Blu overcomes the gp open prolem with clever development tht is sed on cndlestick chrting: The Ergodic Cndlestick Oscilltor (ECO) nd its Signl line. The doule smoothing Blu employs hs n effect tht overrides the gp sitution in the MCD type indictors. Bill s ook, Momentum, Direction, nd Divergence, pulished y John Wiley & Sons, shows the power of doule smoothing. In fct, Perry Kufmn discusses this in his ltest ook, Trding Systems nd Methods, lso pulished y John Wiley & Sons. Those of you who my e interested in highly technicl description should check out these two ooks. Bill Blu not only gve his lessing to use his clcultion, ut we hve injected some of his privte djustments to his previously pulished clcultions. s we get into ctul usge you will see how the Own/Next/Higher time period clcultions exclusive to Fioncci Trder users cn empower our pproch to the mrket. Especilly when we plce the Dily Ergodic Cndlestick Oscilltor (ECO) on the 50-minute r chrt nd comine it with the 50- minute ECO. s mentioned erlier, one of the strengths of this oscilltor is for intrdy trding. Unlike most Fioncci Trder Journl Pge 1 Volume 1, Issue 7

2 Signl Line ECO Line x y Chrt 1: Ergodic Cndlestick Oscilltor. The ECO for this June 1999 T-onds pln (D/W/M) is set t 13-periods. The "-" setups re crossover signls. other oscilltors it cn hndle opening gps without the usul lg. But s we shll see it is lso useful for dily rs. The settings my e different ut the concepts re similr. Let s strt with Chrt 1, the dily T-onds for the lst three months. The ECO for this pln (D/W/M) is set t 13-periods (dys). While your re setting the lookck period plese mke the symol circle 2 on the ECO line. Chnge the Signl Line to different color. Not only does the ECO Line cross ove nd elow the Signl Line, giving us resonle filter to uy nd sell with using ny entry nd exit trigger of your choice for your pln, ut the ECO line s dots nd their chnge of direction cn lso e tool. long the ECO line Chrts 1 nd 2 you will notice smll "" nd "." These denote whenever the ECO line chnges direction from dot "" to dot "" nd the dot "" touches or closes pst the Signl Line. Here, "" must t lest touch the Signl Line to e useful. There were seven occurrences of this setup in the lst 12 weeks. Only points "x" nd "y" Volume 1, Issue 7 Fioncci Trder Journl Pge 2

3 3 2 1 Chrt 2: June 99 T-onds Dily/Weekly/Monthly Pln. Here re three setups using the ECO Line nd the Signl Line. Notice tht in ech exmple of the "-" setup the ner term pek or low hd een seen. were tricky four dy rlly in from 2/1/99 to 3/1/ 99. The other six - setups provided us with potentilly trdle situtions. Note how ner the signls re to the strt of move. I wnt to emphsize tht this is not stnd lone system ecuse it is not 100%, not tht ny tool is perfect, ut s guidnce system it cn e used in numer of wys. We will exmine Chrt 2 s to usge nd guidnce. Chrt 2 is zoom-in version of Chrt 1. Let s tke close look t the lst three instnces of the ECO s -. These re leled 1, 2 nd 3. fctor tht ll three hve in common is tht once n - sets up on the ECO line, the high or low of the r tht cused the setup is not surpssed efore the next - setup occurs. This seldom occurs nd I suggest tht you use three ticks pst the high or low of the setup r s your risk point. Check it out nd you will see. Now, wht does this men? Look t r leled 1 in Chrt 2. Directly elow is the - setup, in other words this r cused the setup. From tht dy 1, the Eco Line is elow the Signl Line indicting tht short positions re Fioncci Trder Journl Pge 3 Volume 1, Issue 7

4 F If the dollr mount you re willing too risk is too gret then you should pss on the trde. There will e more trdes. F more pproprite thn long positions until the next - sets up directly elow r 2. s I sid erlier, fter n - sell setup occurs, such s t Br 1, very seldom is the high of the sell r 1 tken out y three ticks until the next - hppens in the opposite direction. Therefore, to use this informtion is to e wre of this Br 1 s high, nd dd three ticks, nd tht cn e stop for short. If the dollr mount you re willing to risk is too gret then you should pss on the trde. There will e more trdes. You cn see tht Br 1 s high ws not chllenged efore the next - occurred. So during this trde from Br 1 your stop ws not pproched. Sme thing occurs on Br 2. I would hve put my stop just elow the low of Br 2, nd it turned out tht this ws profitle long. Next, we hd n - elow r 3. Our stop t Br 3 ws sfe on this short sle setup. Does this lwys work? No, there will e stops hit, ut check it out it could e useful. I hve used this these lst twelve weeks s the chrts re up to dte s I write nd trde. nother wy to use this informtion is to use it s filter for your intrdy plns. Let s look t the long setup from Br 2 on Chrt 2. t point "" the ECO Line ws just ove the Signl Line. Keep your eyells peeled ecuse once the "" occurred, not only does the ECO Line move ove the Signl Line, ut the dots of the ECO line kept rising, thus confirming the long position. This lsted for six dys. s this setup occurred you could tke long positions vi n intrdy pln, providing ech dy you tke ction if the mrket is ove the dy s open. This could hve een the sis for trdes on some three rs fter the Br 2 setup. We will look into the sutleties of n intrdy pln next. Note tht Br 2 s low (your stop) ws not touched. Now, Br 3 s "-" setup provided us with potentil shorting opportunity, which is the current phse of the mrket s I write this, the evening of pril 18 th. Chrt 3 is useful exmple tht introduces my multiple time frmes concept with the ECO nlysis nd the Dynmic Rnge incorporting the High Time Periods Dynmic Fioncci Chnnel (DFC). Let your imgintion sor. We re mixing time frmes to check the geometry of the time frmes we re trding, which is the 50- minute rs. Here re the settings: DFC set to High (Weekly), 5 periods DFC set to Next (Dily ), 5 periods Dynmic Rnge set to Next (Dily ), 1 period ECO set to Next (Dily), 3 periods Plese set the ECO symol to circle 2, so you cn esily distinguish crossovers of the Signl line. Volume 1, Issue 7 Fioncci Trder Journl Pge 4

5 DFC High, Weekly DP B DR1 DFC Next, Dily DR1 DS1 DFC Next, Dily DFC Next, Dily DFC High, Weekly B This chrt shows just the Next Dynmic Pivot, Dynmic Support 1 nd Dynmic Resistnce 1 lines. DS2 nd DR2 hve een left off. ECO Line B B Signl Line Chrt 3: June 99 T-onds 50-minute/Dily/Weekly Pln. Here, we re incorporting the Dynmic Rnge, the Dynmic Fioncci Chnnel (dily nd weekly) nd the 3 period Dily Ergodic Cndlestick Oscilltor. Let s tke the next explntion nice nd esy, step y step, nd then tie it ll together. There re two sets of -B setups. (We'll use cpitl letters for the intrdy pln.) The first is to the long side, nd the second is for short sle positions. 1 st "-B" 4/2/99 ) 50-minute Brs touches the lower Dily DFC nd the Dily DFC touched the Weekly DFC. This ws covered in the previous issue of the FTJ. B) The Dynmic Pivot (DP) is ngled upwrds nd so re the Dynmic Resistnce 1 (DR1) nd Dynmic Support 1 (DS1). C) The Dily ECO (set t 3 periods, N) on the close of tht dy sets up cler -B pttern. Plese note tht tht if you re wtching this in rel time then the "-B" setup occurs during the trding dy. But you will only see tht if you wtch during the dy s ll of these tools re live nd chnging on tick-y-tick sis. The mrket t this point hs shown its hnd nd is displying n upwrd is. Note the nice upmove. The DP, DS1 nd DR1 re ll pointed upwrds until 4/9 when the DR1 slms down- Fioncci Trder Journl Pge 5 Volume 1, Issue 7

6 wrd nd the DFC Dily chnnel s top nd levels off. t this point down sloping sets up on the dily ECO line. But, it is not until two dys lter tht the down sloping ECO Line touches the Signl Line nd we now hve down sloping "-B" setup. Look t the r chrt (50-minute) on 4/9, DR1 ws sloping downwrds ut DS1 is sloping upwrds. The sme thing hppens on 4/12. Here, the mrket enters into congestion trding phse. We hve seen this pttern efore! Now let s check out 4/13. ) The ECO Line goes elow the Signl Line, nice filter for short. It stys in tht sme mode for four dys. B) The Dynmic Pivot points down nd stys pointing downwrd for four dys. C) The DR1 nd the DS1 mostly point down. D) On 4/19 the dots of the ECO Line turns up nd touches the Signl Line. This could e new -B setup. rs, our High time frme). TM 2) The 45-minute Dynmic Trio flips to the upside on 4/20 t point "". Note the effect on retrcements 1, 2, 3, 4 nd 5 s prices test the 45-minute Dynmic Trio (Next), nd the mrket holds t support. Ech of these provide possile entry to the long side. But does the 9-minute ECO confirm? Wht does the 45-minute ECO sy? 3) The 45-minute ECO (set to 26-periods) supported the up trend, nd, yes the Signl nd the ECO Line touched lte in the dy on 4/22 ut the ECO Line never went elow the Signl Line. 4) The 9-minute ECO (set to 26-periods) does nice jo of fine tuning the trend. fter point "" occurs look t how mny retrcements were supported y the 9-minute ECO. If it ws used s type of filter, s in points 1, 3 nd 5, you cn see resonle uy indictions. These were lso cked up y the 45-minute ECO. Chrt 4 is the S&P 500 June contrct, 9- minute/45-minute/dily Pln. We ll look t some potentil comintions tht cn e used in conjunction with the ECO. Here, we ll mke use of ll three time periods, the 9/45/Dily. 1) The Dily DFC is used to define the extreme prmeters. This is set t 3 periods (on dily Chrt 5 is lso the S&P 500 June contrct, 9-minute/ 45-minute/Dily pln nd provides n interesting picture. Let s dd our old friend the Dily Blnce Point Steps. This is comined with the Dily DFC nd the 45-minute ECO nd should mke you smile. Check it out point y point. From point to point D the dily trend is up sed on the rising Dily Blnce Point Steps. On the close of dy D the Dily trend turns down. Volume 1, Issue 7 Fioncci Trder Journl Pge 6

7 Useful Comintion minute ECO Line 1 45-Minute Dynmic Trio DFC Next, Dily 45-minute ECO Line 45-minute Signl Line Chrt 4: June 99 S&P minute/45-minute/dily Pln. This chrt shows the Dily Dynmic Fioncci Chnnel (DFC), 45-minute Dynmic Trio, 9-minute nd 45-minute Ergodic Cndlestick Oscilltors. But note t Dy B, the prices penetrte elow the steps. In ddition, the prices hd touched the upper nd of the DFC nd the DFC hd turned down. Now, if you look t the 45-minute ECO, did it support possile short? The rlly from points C to E ws counter trend rlly. ny short sle from point E ws with the dily down trend. Nice opportunity, s fst 50 point move down to point F followed the temporry penentrtion of the flling Blnce Point Steps nd the ner touch t resistnce sed on the Dily DFC. Next, fter the steep fll the mrket touched the Dily DFC t point F. Prices then rose to check out the dily Blnce Point Steps which re still in dily downtrend. But, t point G prices pss the BP steps to the upside nd the next dy t point H the dily trend turns (similr to points B through D). So if you ought t point F it would e trde counter to the Dily Trend. Plese note tht the 45-minute ECO supported this counter trend move. I leve it to you to check out the 9-minute ECO. s you cn see our tools re getting shrper, ut it tkes more time to explin, hence we spred these two new tools over two issues of the Fioncci Fioncci Trder Journl Pge 7 Volume 1, Issue 7

8 B D E Dily Blnce Point Steps C G H X Dily (High) DFC set to Three Periods F The 45-minute ECO Line is helpful Chrt 5: June 99 S&P minute/45-minute/Dily Pln. Here re the 9-minute rs with the Dily DFC, nd the Dily Blnce Point Steps. Trder Journl. We will crry on with further detils of these techniques in greter detil in the future. Plese wtch these tools in reltime if you cn. But if you do your cktest r-y-r you will see how the Higher Time Frmes for the DFC lines move out. I cn only show you sttic picture on these pges. However, I m investigting multimedi progrm clled Lotus Screencm, which would enle me to plce on CD-Rom Trder Journls. Hopefully, it ws set of moving chrts with voice worth it. There is more coming, especilly explntion. This should e useful closer look t stocks nd ddition to the Fioncci some mjor news. Trder Journl. Thnk you for your ptience in I wish you super trding, witing for the lst two Fioncci Roert Krusz MH, BCHE F The FIBONCCI TRDER JOURNL is copyrighted nd pulished y the: FIBONCCI TRDER CORPORTION 1835 US1 South 119, Suite 352, St. ugustine, FL Phone: , Fx: , This journl is for eductionl purposes only. Futures trding is high risk sitution. This puliction is not rendering ny trding dvice. Plese consult the services of professionl competent person. Fioncci Trder Journl Pge 8 Volume 1, Issue 7