The Impact of Change on NOT

BarroMetrics Views: The Impact of Change on NOT

Given the exchange I had with Baz yesterday, I felt an example of what I meant was in order. I said that the NOT’s expectancy return had not changed: they are what they have always been. I took Baz’s comments to mean that NOT probabilities for success had been somehow altered.

The best way to illustrate my meaning is by way of example; let’s look at the EURUSD.

Figure 1 shows the EURUSD 12M chart.

At B we see a greater than 78.6 retracement of XA suggesting a sideways  market would form between XA. It also suggested that B would be at least 78.6% of XA and would probably go to the Primary Sell Zone. B went to the 78.6% and sold off raising the probability of a triangle in the process of formation.

I found the swings XA, AB, b1C  relatively easy to trade. But let’s look at the area around rectangle on a daily chart (Figure 2). The rectangle marked a period I have found difficult using NOT material.  But that did not change the NOT probabilities, NOT has always had difficulties when dealing with complex corrections.

For NOT, the benchmarks are 1.3817 (upside breakout) and 1.3288 (downside breakout): acceptance beyond these points would indicate the end of the complex correction. But until that happened, we could either wait for the breakout (stand aside) or seek to obtain a position ahead of the breakout. But this is easier said that done.

Notice the gap – on that day, it looked like an upside breakout was on the cards. Instead, we saw the market reverse.

The new tools provide finer benchmarks. They are a series of support and resistance zones. Breach of a zone suggests a move to the next e.g. in the EURUSD,

  • With last night’s move the EURUSD ought to get to 1.3125 BEFORE we see acceptance above  1.3310.
  • Acceptance above 1.3310 suggests a move to 1.3594.Should we see a move above 1.3310, the tools would also provide benchmarks for ‘failures’.
  • Notice that the 5-d does have a potential for a Spring Change in Trend IF we see acceptance above its Primary Buy Zone 1.3319 (Figure 3)

The example best illustrates the advantages of the new tools – we have finer benchmarks. NOT will ultimately tend to produce the same signals but will do so later and in some cases, much later. This tardiness does affect the expectancy return under some trading environments.

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FIGURE 1 EURUSD 12M

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FIGURE 2 EURUSD 18d and 5d

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FIGURE 3  EURUSD 18d and 5d

8 thoughts on “The Impact of Change on NOT”

  1. I read the blog on the 19th April to mean that your expectancy HAS changed and that the last time this happened you did not return a profit for 3 years.To correct this,you use a new method which is more mechanical. A new methodology.My point was why subscribe or buy an old method if the author uses an new method to make profit. Why buy a black and white TV when the author uses colour TV. Any figures you quote now,are for a new methodology not the old methodology. A distinction must be made or its misrepresentation. We can agree to disagree,i’ll still have a beer with you but i think colour tv wins. cheers baz

  2. Hi Baz

    Thanks for the post.

    Yes the last time I struck an abnormal Ebb Stage, it was a particularly deep one. I am not sure whether it was the method or me – probably a combination of both.

    One thing….

    Whenever I have mentioned my trading ‘stats’, I stressed that they represent my trading – the totality of what I used: Barros Swings, Ray Wave, Market Profile and the 30-years experience I brought to the table. (And now it would include the ‘levels’).

    I can’t ever remember quoting my trading stats and ascribing them to NOT alone.

    NOT still represents the foundation of all that I do. The levels represent a refinement of my ideas. They are not a standalone but are part of my total toolbox.

    Of course we’ll have a drink together – life would be boring without a difference of opinion.

    We do agree that the new ideas represent an improvement – a colour TV. (G)

  3. Ok i can accept it as a refinement of ideas.But picture this. A person attends your lecture and becomes highly motivated and says I want to be just like Ray Barros. They purchase all your methodolgies and do everything exactly as the books,tapes etc say to do, with the expectation of obtaining similar trading results. They find they havent made a profit for 3 years using the method they bought. Yet this methodology is still being taught and still readily available. They will never be able to emulate the trading profits of the teacher,no matter how diligently they apply themselves because the teacher uses another methodology to obtain completly different results knowing full well that the old methodology doesnt cut it anymore at least in the market the student spent 3 yrs trading in.With all due respect. Knowing now that there is a new method,why would i buy into an old method that no longer has an edge?

  4. Hi Baz

    That’s a nice straw man situation. It’s a straw man because there is not one student out there who has done, Barros Swings AND my MARKET PROFILE AND my RAY WAVE.

    For those for whom my stuff has made a difference (at least those I know of), they have adapted all my Barros Swings and made it there own.

    There are two students, peers now, in whom I have great pride: one the fund management side, Tom Wong and on the retail side, Pete Whitnall. While I was going through my drawdown, late 1996 to early 2000 (or thereabouts), I know Tom was having a stellar year. I don’t know that Peter has ever had a sustained drawdown period.

    Throughout this discussion, I sense three things;

    1) that you see a method, like Barros Swing, as producing static returns i.e. the same returns under all environments for all traders. And

    2) that you see my returns as being the product only of Barros Swings; and

    3) and that you appear to believe that students take a course like Barros Swings and apply it exactly as taught.

    None of this is true.

    For example, you tell me that Barros Swings have a made a difference to your trading. I would bet you a penny to 100 pounds that you are not applying the ideas in the same way I am.

    And that is the way it should be.

    You have adapted the material and made it your own, with your own nuances to suit your personality and decision-making style.

    My last word: despite your early statement that you accept that ‘it as a refinement of ideas’, you still seem to see the new tools as a separate stand alone method.

    But that’s not the case. The tools merely provide finer trade management. If my approach did indeed permanently lose its edge, then all the new tools would do is allow me to lose money at slower rate.

  5. Your correct that i didnt read it as new tools or finer trade management I took the words New Methodology to be vast and sweeping changes,a totally new method,not a simple refinement. I came to that conclusion because of the example you provided, 3 years is quite a dramatic example and therefore dramatic changes needed and that the New Methodology,therefore was a stand alone (mechanical)method to combat this.
    The only idea i have adapted so far is a final stop loss placement.I continue to research and evolve but i designed my own system and have been trading since 1987. Im going for a beer and watch colour tv. cheers baz

  6. I used Gann Swing Weekly chart and Daily chart for trend identification before using Barros Swing. Barros Swing combines Gann Swing Weekly Chart and Daily Chart together. I believe that Ray does a good contribution in Technical Analysis if people can use it. To me, Gann Swing Chart is a black and white TV while BARROS Swing is colour TV.

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