S&P 2014-10-13

BarroMetrics Views:  S&P 2014-10-13

I am postponing the conclusion to Default Future until tomorrow because a very interesting event occurred last week….

Figure 1 shows a weekly chart of the S&P with the levels marked from the 1815 lows to the 1987 highs. We see that the S&P has closed below the top of value. Normally I would expect the next stage to be a move to the bottom of value at 1872 en route to the Primary Buy Zone at 1831 to 1815.

Moreover, a Upthrust Change in Trend pattern was triggered for a swing of an 18-day. magnitude.  This normally would suggest a move to at least the Primary Buy Zone (1831 to 1815), and probably a change in trend from up to down…..normally. 

But, these are not normal times. QE has so distorted the S&P price mechanism that even reliable patterns like an Upthrust have failed more often than previously.

The question now is are we seeing a tipping point of the belief that the FED will, and can, forever rescue the US Stock Market Bull?

Figure 2, for me, provides the tools to answer the question.

The current retracement may be said to form a test of the retest at 1909. In the process it has taken out the prior July 2014 low. The 13-week swing line will turn around 1904.

Now, if the 13-week swing line does turn down, and this is followed by a bullish conviction bar close above 1920, we have a continuation buy signal that suggests the Bull is intact.

On the other hand, a bearish conviction close  below 1878 will confirm the scenario of Figure 1; it would also imply that a bear market has started.

Finally, I’d note in passing, that if we see a monthly close below 1913, we’ll have seen a sell signal in the system I presented earlier this year. It would be the first time since the Bull started that this system has triggered a sell.

The system comprises of:

  1. a setup: the current CAPE reading is at least 150% above its long-term average; and 
  2. a trigger: a monthly S&P close that is 3% orf more below the previously monthly close. 

The signal is invalidated with a monthly close above 2020.

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FIGURE 1 18-day S&P Cash

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FIGURE 2 18-day S&P Cash 

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FIGURE 3 CAPE

ORSS Final Day

BarroMetrics Views: ORSS Final Day

This is the final day for ORSS at SGD887.00. If you are thinking of joining the community, act today. You will have another chance in November because I have entered into an agreement with the CMI group to make ORSS available to their clients – for SGD1200.00. This is an increase  35% on the current investment.

Today, I’ll post some of the questions posted to the blog. Many questions are worth a repost especially since  many don’t read the comments:

Q1: I agree that the ORSS package is a very good offer.

On a value basis and given your background and ethics I would snap it up but for the fact that I do not believe I would stick with a system that has had 16 losing trades in a row. I would suspect that will be a problem for others as well. I know losses cannot be avoided.

Curious if you have had feedback along similar lines from others.

A1.  Turning now to the issue you raised about consecutive losses…..

*The theoretical losing streak is 9.4, say 10.
*The theoretical probability of a 16 consecutive loss is ‘0?%

So, the 16 consecutive losses is an outlier – BUT it did happen in the testing period. Probably a situation where the assumptions behind the system changed for that period.

ORSS students would be taught when to suspend trading the system and when to restart. The questions for those who take up the system is whether they can accept the max theoretical consecutive loss. 

I did receive a two enquiries along your lines. I gave the same reply.

Q2: Ray,

Can you expand on:

“Probably a situation where the assumptions behind the system changed for that period”.

No comprende Amigo.

A2: Every mechanical system assumes an underlying condition; if that changes and you are unaware of the change, losses follow; e.g. the quants in 2007 crash lost a bomb because their assumptions about 2-way markets and volatility were no longer operating.

ORSS assumes that when the opening range (however defined) breaches one extreme, 80% to 90% of the time, the opposite extreme will hold. It also assumes that diversification of instruments is in play.

If these assumptions change, and you are not attuned to the changes, you set yourself up for ‘black swan’ series of consecutive losses.

 Q3: For this ORSS system,

1) Do I need to use special software like Market Analyst? Can I use MT4? For MT4, depends on which time that the chart is using (NY or UK time), the daily chart may have 5 or 6 candles per week, is that OK with ORSS system?
2) I saw the expectancy data that you have shown in your video. I would like to know on average how many trades we have in a year for markets that you have tested

A3: 1) You need not use MA. If you know how to code MT4, you could code what you need for MT4. Otherwise you can manually draw what you need on your platform (you draw 4 lines).

2) About 10 trades pa per instrument.

Q4: (Paraphrasing 3 questions into 1): Does ORSS work for all trends, up down and SW?

A4: ORSS’ logic enables it to return a positive expectancy in all types of trends i.e. Yes to your question.

It does have a weakness: where there is a buying or selling climax that is followed by a low volatility sideways market. For this reason, the simple rules I created avoid trading in this environment.

That’s it folks. The end of a series that has produced interesting comments and much interaction. Thank you all for taking part.

Default Future and Success II

BarroMerics Views: Default Future and Success II

So, what is our default future?

It is the pathway of automatic neural responses  created up to the age of 11. Operating at a subconscious level, the responses kick in whenever our subconscious perceives a change in our environment as threatening. Unfortunately, our subconscious treats a life-threatening event in the same way as an event which is psychologically threatening; e.g. it treats facing a mugger in the same way as facing the probability of being stopped out at a loss. Indeed, the same area of the brain lights up for uncertainty and ambiguity as when we face  a mugger.

I call this response the 3Fs – fight, flight (and, in extreme cases) freeze. A 3F response reacts not to market information but as a way of releasing the stress we are feeling. And, since our 3F decision fails to make use of our Right Brains’ intuition, and our Left Brain’s reasoning, the decision we make is more often than not, less than optimal.

Turning now to the failure of our Group 1 to effect behavioural change….Those in the group fail to change their behaviour because change triggers the 3F response. We prefer to stay in our comfort zone because moving outside the zone causes anxiety and pain.

Let’s now turn a Group 2 where the members do put in the work to learn a method, do effect new behaviours but still fail…..next issue

Q&A ORSS

BarroMetrics Views: Q&A ORSS

First off, a big welcome to those that availed themselves of the opportunity of investing in ORSS. We sent out an unadvertised bonus on Oct 5.

In the video, we considered 3 instruments that were shaping up as a potential trade.

Also, not that the one-day turn around in the US$ shows the strength of ORSS: it is able to avoid many of potential whipsaw situations.

In today’s post, I’ll be answering questions raised by those interested in ORSS. I have summarised the questions and paraphrased them – think of this blog as a FAQ.

Q1:  I am a day trader, is ORSS suitable for me?

A1: No. You should invest in ORSS only if you are a swing trader and someone who has a liking for mechanical systems. ORSS comes with 5 rules that are designed to be applied in a disciplined fashion. The four weeks (60 weeks for the first 50) of email support and 4 weeks of video support will ensure you understand its application.

Q2: Will I need special software, charting packages etc. in order to trade it?

A2: No. While Market Analyst will make it easier and quicker to plot, we provide all you need to implement ORSS on your trading platform.  It will take you 3-4 mins per instrument to plot on your platform.

Q3: Do you intend the system to only be traded on FX

No, ORSS can be applied to all class of instruments. In the bonus I sent out on Oct 5, we looked at Gold, Crude Oil, S&P and a FX pair,

Q4:  How do I know ORSS will work?

I’ll answer that question on two levels.

First, the technical……We have back tested the system. I have shown you the results of that when we launched ORSS.  te

We also have had real-time confirmation of the testing results.

The beta-testers Group 1, have shown better results, because the current trading environment favours the system. You could classify the back testing as the worst results you could expect. As you know, the back tested results showed a result with a strong positive expectancy.

Group 2 have yet to complete the testing.

Secondly, the psychological……The underlying question is whether you can trust us. The unfortunate truth is:  our industry has its share of false promises so that the reality after the investment falls short of the promises.

You will have to make up your own mind on this  aspect.

I have been trading for over 30-years have the respect of my peers. Those who have taken my training know that I do all I can to help my students succeed.

Q5: I have bought many systems and they have not worked; how can I be sure ORSS will be different?

The results you generate may due to the negative expectancy of the system (i.e. the system is at fault) and/or due to your failure to execute (i.e. your discipline has to improve).

ORSS does not fall into the first category – it has a positive expectancy. As for the second, the current blog series will suggest a couple of excellent books; or you can try a trading coach.

Q6: I have been unable to find a commercial money management program. Can you recommend one?

I’ll be happy to send you a link where you can download the suggested vendors – just drop me an email with the subject: “Money Management Journal”.

Default Future and Success

BarroMerics Views: Default Future and Success

There are about 3000 to 4000 readers of this blog. If the stats are accurate, then 90% of active traders are losing money. The most recent of the studies I know of is:

The studies show that the largest group in the unsuccessful  camp can be categorised into two group extremes (Figure 1) Within the two extremes, fall many nuances of the extremes:

  • Those who attend all possible educational events, and
  • Those who won’t spend a nano-dime, and nano-second, to learn how to trade.
  • Between these two extremes will fall many to the left of group 1 and to the right of group 2 (Figure 1).

Let’s look at the second exreme first.

Think about this:

Trading is  as much as a profession and craft  as law, medicine, carpentry,  plumbery etc. Yet, no aspiring professional or craftsman would dare to dream of attaining success without contemplating first acquiring an education.

So, what chance(to be profitable) would those leaning towards the second extreme have? As my Australian mates used to say, ‘Buckleys’.

We can’t accuse those in, as well as those leaning towards the first group, of not wanting an education. Indeed, they chase it with a vengeance –  free talks, paid seminars, week long workshops – you name it, they attend it.

BUT, they share one characteristic with the second group – a characteristic that ensures their failure: despite all their education, they exhibit no behavioural change.

Here’s the thing, no matter how good the educator, how excellent the content, those falling into this main failure group will not be helped until they become aware that it is they that hold the keys to their success – to succeed they need to become aware of their default future.

It’s worth repeating that I am speaking about the main group, the one the two studies showed most of the failing traders belonged to. Within this group, there were two  extreme categories – ‘indiscriminate seminar attendees’ and ‘educational no-nos’, with many leaning towards one or the other extreme.

More Wednesday……

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FIGURE 1

ORSS is Live!

BarroMetrics Views:  ORSS is Live!

Morning.

ORSS is live! To register, go to:

http://www.barrometrics.com/buy-opening-range-swing-system/

or

http://www.barrometrics.com/opening-range-swing-system-video-4/ 

The offer encompasses:

  1. Instrument Selection video (FX) .
  2. ORSS Instrument Selection Pdf
  3. ORSS Method-Excel video. 
  4. ORSS Barros Pivots Template
  5. ORSS Method-Market Analyst video. 
  6. ORSS Market Analyst pdf
  7. ORSS Checklist. Mind and Money video
  8. Psych Journal Excel Template.
  9. Turtle Contracts Excel Template
  10. 4 weeks email support (first 50 receive 6 weeks)
  11. 4 weeks of weekly videos showing my application of ORSS

Given what ORSS delivers, and the support you receive,  at SGD887.00, this is a great value product. Remember the offer closes midnight, Friday, October 10. And, the offer won’t be repeated.

BTW…..don’t forget, your bonus downloads are at:

http://www.barrometrics.com/opening-range-swing-system-video-4/ 

Thanks again for all who sent in comments and emails.

Video 4 Link

BarroMetrics Views: Video 4 Link

Here is the Video 4 link: http://www.barrometrics.com/opening-range-swing-system-video-4/

In this video, I show Ultimate’s trade management.

Also, I promised those who wrote in, a decision on making available, the mechanical system, Opening Range Swing System (ORSS). I mentioned in video 1 that I had intended ORSS only as a bonus to Ultimate attendees. But, the interest you have shown has been huge, hence the postponed decision.

I have discussed the issue with my partner, Peter Ow, and have decided to release it to you. I need to finalise some details so the launch will be tomorrow. Here is the link to the launch (effective tomorrow which means only click on link tomorrow):

http://www.barrometrics.com/buy-opening-range-swing-system/

The offer is open for a week and won’t be repeated.

Finally tomorrow’s link will also contain bonuses to Ultimate’ method. It was impossible to do justice to Wyckoff and the Market Profile in a short video. So, tomorrow the bonuses will be:

  • Basic Auction Market Trading Concepts for Winning Trades (Market Profile). Auction Market Theory is one of the foundational elements of the Profile.
  • Stock Market Trading, the Wyckoff Method.
  • Wyckoff Market Analysis.

Tomorrow, just click on today’s link to access: http://www.barrometrics.com/opening-range-swing-system-video-4/

Finally, I want to thank Paul, Baz, Sorin and Joshua for commenting on the blog. I also want to thank those who emailed – though I would prefer you post your comments to the blog.  Nevertheless, thank you for taking time out to drop me a line.