Prediction Wizard

 On the market we are not alone.

Not every participant spends  the same amount of time on the market during a Day, Week and Month period, and even the time of Day, Time of Week, Time of Month  of the participation  not evenly distributed.

If we are looking at any asset and using only one time-frame, than we are limiting ourselves  to view only  a relatively small piece of  the puzzle.

How small is the puzzle that we are viewing?  It probably depends on the  asset in question.

First we make the rough assumption, that  the number of market participants, distributed among the different time-frame is evenly.

With this we might assume, that just by viewing three different time-frames, we are looking at the market, and follow that  while have some feeling about three times as much participants as  we would have just by viewing only one time-frame.

Depending on  market, and available  monitor space, we  use the following  set of time-frames in our monitor settings (Only one of these setting at a time):

1.       1 – 5 – 30 Min

2.       1 – 3 – 5 – 30 – 60 Min

3.       1 – 3 – 5 – 15 – 30 – 60 Min – Daily

4.       3 – 5 – 15 – 30 Min

5.       5 – 30 – 60 Min – Daily

6.       TICK – 1 – 3 – 5- 30 Min

Each time-frame has its role,  in our charting setups.

The trading decision always made based on the 5 Min time-frame.

All the other time-frames are used to optimize the  entry / exit on the 5Min Time-Frame.

We use the higher time-frames to get some feeling about the bigger picture and longer-term potentials, which might  also affect position size.

We use lower time-frames to  tune the trade entry / exit, down to the TICK level optimization, though that is not always used.

In addition to charting we use two monitors exclusively for trading purposes connected to the brokerages, and already have arranged Long and  / or short limit orders and market orders prepared, so that anything happens with the market we can be in or out within 1- 2 seconds.

In a very quick market, when we already made the trade decision the TICK chart  gives us a good way to time the trade.

Every trader has different setups, and  even if  we would like to follow more,  it is impossible  to focus on 6 different charts at the same time. Even for us, it took considerable time  to learn to focus on the  very few, which considered to be important in a given time.

As one of our favorite focus comparison  is juggling.  I learned to juggle with three balls in  less than  2 weeks,  learned to juggle with 4 balls  in about 6 month, with  five in about 1.5 years, and with six ball it took more than 3 years to  play without dropping for an extended period of time.

But when juggling  I can do it for very long time using only three balls, but only a few minutes  when  I do it with five balls…

Same with chart following. The beginner will not be able to follow even three.

And even if an outside viewer is able to  recognize the  ballistic curves  the balls moving around and understand how it is done,  will not be able to  do the same, unless  have some talent and practice that for a few years.

Back to the time-frames.

The distribution of market participants is not even among the different time frames.

Some years ago we completed  a little  research in this respect to see what other players of the market use.

We make the following assumption:

All  market participants  use  any of the following 10 time – frames:

1, 2, 3, 4, 5, 10, 15, 30, 60 Minutes and Daily.

The total number of participants  in these time – frames considered 100% in this case.

The distribution of  viewers  presented in the following table:

 What might be a little bit surprising is that the three most popular time-frame among participants is the Daily, the 30 Minutes and  the one minute time-frames.

A bit less widely used by other participants the 5Min time-frame, our  preferred time-frame.

Obviously if someone is trading as a swing trader or investor, the 5minutes time-frame will not be important for decision making,   It could be very important only for intraday trading.

On all of our charts we put at least the following  indicators to help us  quickly make the judgment about trending,  and others.

-          SMA10

-          WMA10

-          Bollinger Bands (MA20, 1.85 Std)

-          Volume

-          MACD

-          CCI

Market turns happen first on the lover time-frames. Than, if  volume or participation is strong enough and supportive, than markets might turn on the higher time-frames as well.

Please note that  disproportionately more participant, more volume, more money  needed to  turn a strong downtrend / uptrend  on the 60 minutes time-frame, than it is needed to turn the markets  on the 1 – 3 minutes time-frame. 

While the S&P 500 could be turned  on the 1-2 minutes time-frame by using a couple hundred million dollars,  it is definitely in the multibillion  dollar range to turn upward a strongly down-trending  market  on the 60 minutes time-frame.

Market manipulators try to pinpoint the  area, and time, when  a market turn could be accomplished  by using the least amount of funds  necessary, assuming that a turn is in the interest of the major market player(s).

Obviously less bear player  want to stop a strong uptrend  at its higher momentum area or less bullish player want to sop a strong downtrend at the highest momentum area.

By looking at multiple time-frames we can  improve  our performance, and could  assure,  that higher odds are on our side, if  we are checking  more charts before our trades.

For example trending direction on a time-frame  could be quickly identified by using the SMA10 / WMA10 on the chart, and their relative position, in addition to checking the other indicators.