Cycle Trading

Someone messaged me about using standard deviation. Which is something I traded the crap out of for years over 10 years ago. I had journals at moneytec.com and elitetrader.com way back in the day before this place came around. (Yes, I've been around a long time.) The idea is trade in the direction of the channels waiting for price to come up off the bottom of an up channel for a buy and vice versa for a sell targeting the mean as the initial target and the opposite end deviations as the aggressive targets. Done on multiple time frames can yield some extremely accurate targets and timely entries. I started a journal here using the system to show it to some peeps a while back.

Below is a rolling 3-day standard deviation forecast along with a monthly price time forecast. I bought the crap out of the EUR/USD both spot and a couple of OTM options when price was at the -1 deviation. Targets on spot were the Mean and +1 which both hit. Targets on the OTM options were 1.2440 and 1.2460 which easily hit. I also did a Put OTM at the +1 deviation expected a drop back towards the mean targeting 1.2480 which hit. Very profitable day.

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Shorted S&P. Look at the beauty entry. FTR, when I short in my MT4 that has futures data, those are demo but are usually the entry areas I use for Nadex which are real. I didn't short this in Nadex, though since I already had quite a bit of Nadex going on with the EUR/USD as stated in the previous post.

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Shorted NZDUSD. Look at that entry! The entry target area was based on the +1 deviation line being the upside of a downward channel and that price level also being a daily range target. The wave forecast gave the timing.

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Wasn't able to get the very bottom when price hit the trendline. But good enough! Price moved the avg of my version of the ADR.

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Last night I went long with an OTM binary on the EURUSD looking for a touch of 1.2440 at $25 per contract to net $25 per. Obviously it hasn't played out that way yet. I did a directional ATM/OTM hedge when price was under 1.2360 at $45 per. Closed that out for net $25 per which paid for the OTM that is pretty far OTM. That's basically a free trade at this point and expires at 11:00 pm EST tonight. I'll grab whatever profit it gets. If I can even get out at a loss under $25 per, the overall net trade will be profitable since because the hedge already covered.

The temptation is always there to hold a hedge to expiration despite warning signs. I've been burned on that too many times. If I'm hedging in the direction of the trend, it's a case by case depending on the signs. But hedging against the trend.... I'll settle for just covering and being b/e. I had to walk away from the screen most of the morning as to not give in to temptation.

Here's what I was looking at on EURUSD last night. The arrow on the left was my entry and my estimated target was the rectangle. The cycle was spot on, just not the magnitude. The arrow on the right was the directional hedge. The cycle was spot on. Probably going to be looking for OTM shorts later tonight.

http://content.screencast.com/users/..._eurusd_02.GIF

Short GBPUSD and GBPJPY. +83 and +115 respectively. Both following the forecast pretty well. Trailing stops set. No options open. I got busy programming my nadex binary option ladder indicator to work with indices and gold and didn't get anything set up. Will see how things look in the morning and maybe shoot for an end of range ATM/ITM play.

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gbpusd: http://content.screencast.com/users/...0Jan.%2030.gif

Flipped the phase on NZDUSD after the fact. I wish I had been paying attention at the inflection point. It was a great setup to short coming off the top of the downward channel. Missed the boat on this one. But I wanted to show it to illustrate that just about every cycle tool is going to invert. The trick is knowing when/where inversions tend to happen. After 20 yrs of trading cycles, I've got a pretty good idea on when to start looking for those inversions. Still.. the cycle forecasts are typically the 3rd indicator I use in my methods. The first two being Price and Time. The wavy forecasts are just a combo of price and time.

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EURUSD shot up to the +2 deviation in a down channel and traveled over 110% it's ADR. Shorted the top on the cycle. Also sold an OTM strike of 1.2400 set to exit on the touch and an ATM strike of 1.2440 looking for expiry.

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Re-shorted GBPUSD and GBPJPY. Trailing stops triggered on both of those shortly after the last post.

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The cycle on GBPUSD is flipped. Note the yellow vertical and arrow. A simple tweak and here's a cycle a little more representative of current action. The most important thing is having an idea where the next cycle lows or highs are due and not necessarily the direction/magnitude of the forecast. Again, the forecast is an oscillator I scale onto the price screen to help spot highs/lows. The price action higher/highs, lower/lows take precedent. The yellow vert matches up with the pre-tweaked cycle high.

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Long on EURUSD now. Closed out 20 pips on the short. Cashed in both binaries. The OTM was a few ticks away from the 1.2400 touch and I wasn't sure it was going to get there so I cashed it. Netted 75% of the target price but it's still profit none the less. The ATM/OTM was set to cash to cover the OTM. Overall I netted pretty well but ended up being shy of 1:1.

Also closed out the GBPUSD and GPYJPY. together those came to about 20 pips. Not much, but profitable.

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1.2400 did get broken to the downside. Hindsight. I made up for it by going long with an ATM 1.2400 and cashing it for $25 per and then when price dropped near 1.23800 going long again for an OTM 1.2400 and cashed on the touch for $27 per. I was tempted to hold it for a bigger payout but I hate living/dying on every tick when price is hovering at the strike near expiry. Long and short of it (get it??? haha) is that I love how you can make money on relatively small movements with fixed risk with these Nadex binary options.

Got home from dinner and saw that the AUDUSD had gapped down on some news. I waited for the cycle to tip it's hand and went long on the pin bar. Target being the gap area.. about 30 pips.

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Target achieved: http://content.screencast.com/users/...0Jan.%2030.gif

Long term GBPUSD

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Short term GBPUSD. The wavy line forecast in this one is the one I had developed in wave59 a while back and finally got into mt4. It's not based on price at all. The tricky thing is dialing in the time frame and anchoring. Like the other wavy line, it's an oscillator projected into the price area. So oscillator plays apply. Divergence, not as much weight to magnitude, etc.

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Currently short and had did some OTM binaries over night. I'll post screens on those plays later.

Here are the GBPUSD OTM binaries from the other night. The yellow rectangle is the confluence of the 2 deviation target which is also the mean and then the average trading range target. OTM strikes were 1.4120 and 1.4140. Both set to exit on the touch.

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The bottom spot trade ended up a small loss when price ran back up later and the top spot was b/e.

Last night went long on both GBPUSD and EURUSD on the cycle bottoms. Also ran 3 EURUSD OTM's.

Here's how the EURUSD played out... I used the sawtooth forecast to time price bouncing off the trend line on the 1hr. Then used the price targets on the 30min. EURUSD OTM strikes were 1.2400 (ATM), 1.2420, and 1.2440. I accidentally used the wrong expiry on the 1.2400 and had to sweat bullets because it barely expired ITM by a few ticks in the last few minutes. Luckily I was able to set it up to exit on the touch to at least get out alive with $8 per contract profit. It would have been $50 per had I let it expire but it could have easily been -$50 per. I'll take $8 per over losing, thank you. 1.2420 and 1.2440 were set to expire $10 over the touch price per so $60 per and both cashed. Yellow x's are the option exits. Closed the spots when price reached the ADR.

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Probably done posting regularly for a while. Need to focus on the trading and finishing developing out the next set of tools. The main one being an ADR on specific news events and getting Nadex simulated pricing to go with my Nadex binary strike price indicator.

Uggggg.... USDCAD barely missed my OTM 1.2500 strike! I timed it perfect. Still holding on and will try and cash it early for either minimal profit or get the loss down. The cycle could invert which would be a good thing in this case.

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Two of my overnight EURUSD OTM strikes hit and I closed the last one in profit even though it didn't hit.

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EURUSD short setting up. Both forecast methods are showing the same thing.

Triangle wave, which is a binary fib ratio calc is setup on the 1hr.
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Wavy line which is a look back period analysis forecast calc on the 30 min.
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1.2320 is the possible OTM aggressive target. 1.2360 is the OTM high prob. target.

I escaped that one with $1.50 in profit. After costs it was a .50 loss. But much better than a $30 loss.

Someone asked me if the wavy line foercast works on smaller time frames. Here's from earlier today when I was scalping on the 1 minute chart to pay for lunch.

http://content.screencast.com/users/..._eurusd_01.GIF

1.2320 not hit so I closed it with some profit before the time decay starts eating away at it. Cha ching on 1.2360.

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