The Ten commandments of successful trading and investing with the help of the predictor.
C1. Adequate mental state.
Without this you can’t be really successful on a consistent basis, no matter how good is the methodology and strategy you rely upon. You need to be relaxed, you need to be focused, and you need to be free. Free to accept the predefined profit level, free to accept the risk and the potential losses that comes with some of your trades as part of the game as normal situations and do not get bogged down in misleading thoughts during trading.
C2. Preparation.
The needed relaxed state is more difficult to reach without preparation. This period helps you mentally prepare for the next race. It is always better to be proactive in the market than reactive and without preparation you put yourself 10 yard behind the others in the 100 yard race, even before the market opens.Think from top to down. Consider the many factors, impacting the global markets. The world economy is enormously complex interconnected entity. Check the international markets, the Forex markets, gold, commodities, interest rates in the major countries, the scheduled and unscheduled news, that might have impact on the markets. Analyze the internal state of the market you are about to play.Consider the scheduled news, that might have impact on the prediction dynamics in the next 1 - 5 days.
C3. Defined strategy.
It is a big advantage to have the predictor behind you as part of your trading supporting arsenal. But since the predictor is not a trading system, only a trading supporting system, you need to define your strategy to be successful. To do that you need to study the predictor, understand the behavior and it is even useful to wait a few month, just watching the predictor performance before you finalize your strategy after reaching a greater confidence level with your understanding. For example if we are about to use the Daily predictions in our trading, the strategy will be entirely different if we are using overnight positions, than the strategy using only intraday positions the next trading day. Also important to take into account, that Bullish predictions have a higher Win probability during Uplegs / Bull markets and Bearish predictions have a bit higher Win probability during Bear markets. This is valid for all time frames, but especially true for the Daily predictions.
C4. Weight of multiple index direction predictions on multiple time frames.
It is very interesting to see and understand the internals of the market, watching multiple time frames. Having predictions in front of you on multiple time frames might support you in generating great trading ideas. The divergences will be resolved somehow by the market between the predictions of the different indices and the predictions on different time frames. Watching and understanding those resolutions lead you to have a better understanding of the market dynamics, and ultimately a better trader or investor. Do not forget, that it is important how old is a specific prediction, relative to the prediction period it is predicting. It will impact the weight we apply for the different predictions.
C5. Get ready for Reversal.
After you get a deep understanding of the predictor and gain some experience, you will be able to detect if a certain prediction is correct or Fails. The predictor is not necessarily predicting the index level at the end of the prediction period, it is predicting the most probably market moves after the calculations completed. This means that you need to be prepared to reverse the direction of the positions, at least on those occasions, when you detect the incorrect predictions. The first 10 – 40% time of the given prediction period should be enough more than 75% of the cases to conclude that a prediction is correct or not. A predictor player should be still nicely profitable if does not reverse course on these occasions, but as demonstrated, this reversal play greatly improves the bottom line results.
C6. The predictor is only one tool, and it should not be the only tool, supporting your trading decisions.
The more experience you have with the predictor, the more you can rely on it, but it might take a few month to reach a great confidence in those predictions.
Do not worry. The predictor is designed to be extremely stable and reliable for the very long time and perform equally well in all market conditions, both on the long direction and the short direction.
The predictor SW system is not tuned and it is not optimized as the long term stability of the solution was a higher priority.
Since the predictor is a program, it is behaving consistently well and not impacted by any human weaknesses during longer period of time.
During trading and analysis you can use many different tools, based on other theories, indicators to complement the predictor information.
Any good tools based on Box theory, Elliot wave theory, T theory, Dow theory, different support – resistance analysis and many derived and other theories could be used and potentially improve the trading results.
If you are using a set of tools make sure that there are not much correlations between those. You do not need redundancies, tools that tells you the same all the time, be that a simple indicator, or multiples of indicators, or other predictive mechanisms.
C7. Position management.
Another way to increase you bottom line to apply refined position management during your participation in the markets.
You do not need to hit the rock bottom price levels during a prediction period or pinpoint the exact top levels to be profitable. The market might have a number of swings during the prediction period, and most probably the number of those swings are more than one, except during strong trending markets, which occurs much less than 50% of the cases.
We can’t predict the number of those swings before the prediction period starts, but for example during a trading Day, we can reasonably well predict after the first 30 – 120 minutes that we are witnessing a Trending Day or a Range Day.
The correct identification of these in the early stages might help formulate the best position management strategy for the whole day.
Overall it could be stated that any predictor–based strategy could be more successful, if the position closing
(And many times also the position opening.) implemented in multiple position opening / closing steps, and distributed during the prediction period.
The predictor numbers help us to formulate our bias toward the markets for a specific time period.
C8. The importance of multiple time frames.
No matter which is your preferred trading time frame, it is very important to have the view of multiple time frames. Since the percentage of market participants playing your selected trading time frame is only a small
portion of the total market players, you will get a much better understanding, why certain unexpected moves occur (Looking at it only from one time frame perspective.) if you look at it from many different angles, covering a greater percentage of players.
Even we were a bit surprised in our research discoveries, when we researched the distribution of different time-frame participants on the market and their impact on the movements of the indices.
Imagine that the whole market is a big puzzle.
You will probably not be able to recognize correctly the complete picture, having only 5 - 10% of the pieces in front of you and your reasoning might be very well distorted in that case.
Potential market turns will show up first on the Daily predictor, but not always. You need to learn the dynamics of multiple time frames to enjoy the full benefit of the predictor system no matter which time frame you are trading.
Multiple time frame view also helps you in your quest to be more proactive rather than reactive in the markets.
C9. Analyze your trading results.
It is the whole reason of your participation in the markets. If no results, why would you participate?
But results usually does not come without a long way of learning curve.
Your P/L curve is very important, but the real source of your learning might come from the analysis of your individual trades that is hopefully in your journal.
It might be beneficial to enter a few predictor-information-related inputs into your trading journal, to speed up your learning curve.
Your journal also helps you to get the feedback about the month to month, or year to year improvements that your trading results demonstrate and make the necessary adjustments that might be useful.
C10. Market knowledge, predictor knowledge and trading experience.
The predictor might help the experienced traders more than the new traders.
A minimum market and trading experience required to be able to really enjoy the benefits of it.
It depends on many other factors, but we suggest to have at least 6 month of market / trading experience and 3 month of predictor following experience.