Jim,
Thanks for the reply and references. When I
began this game I studied just about all the cycle methods available
including Hurst and Delta. I doubt that there is a cycle book of note that
is not in my library. I concluded that there was just to much
variability in the accuracy of the trend change forecasts from cycles to
give me an acceptable trading methodology. Now, I admit this is a personal
thing - I just cannot stand drawdown and waiting to be in a profit
position as is required when trading with cycles.
But there was something else about cycles -
they told me nothing about the why of market moves and I wanted something
that was more science than art.To believe that markets moved according to
planetary positions or some physical number periods just was not
acceptable.
It was not until I began to study chaos
theory and the psychology of traders that I developed a methodology that
satisfied my curiosity as to why markets reverse and to give me an
indication of reversal that was close enough to trade with. I set as my
goal a +/- one period accuracy on reversals and a 70% to 80% reliability
on the trading signals , performance which I have documented over the last
ten years.
Now this is not to say that I don't believe
that cycles exist - I certainly do. They just do not satisfy my criteria
for a trading methodology. Others may be able to use then
successfully.
Now regarding the discussion of the
importance of volume. I also have no found no reliable way to use volume
as a trading tool. However I do use measures of tic direction to give me
readings on the sentiment of the market and changes in sentiment leading
to price reversals. I use these every day.
Jim White
----- Original Message -----
Sent: Tuesday, January 19, 2010
7:40 AM
Subject: [RT] cycles
Hello Jim!
I would cycle analysis is more of an art than a
science; I think
even those who follow them would often wonder if
they are there - at
least at times. However, I might agree with you
on the 'static'
comment, as the cycles that I track always have an
average variance
of plus or minus 20% in either direction.
A
similar notion could be applied to Elliott-wave; it is more of an
art
than a science - but there are some who are very adept with it.
As
far as statistical validity, I would doubt you would find any
hard
evidence of that in any trading method (other than something
slightly
above-average). if there were something that worked
100% of the time,
then please let us all know as we would like to use
it :-)
as for methodology, I am going to reference Hurst's
'Profit Magic',
along with Raymond Merriman's book 'Cycles and
Patterns in the market'.
these two are a good starting point for
those interested in cycles. take
what you find useful, discard the
rest - and then add that to what you
come up with yourself. it is
certainly an evolutionary process.
where is Clyde Lee when you
need him? :-)
thanks for the message
Jim