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Time Rhythm Zone (TRZ) projections are one of the many features that are
unique and exclusive to the Dynamic Trader software program. The TRZ routine
projects a zone of time with a high probability of completing any degree of trend
from long-term to very short-term. The user should first project the TRZ for the
larger degree swings followed by projections from the smaller degree swings. The
highest probability time zones to anticipate trend change are when the short-term
projections overlap with the longer-term projections.
For projecting the time zone with a high probability of making a top, the Time
Rhythm Zone compares all previous high-to-high cycles and low-to-high cycles
of similar degree and instantly calculates the overlap period. The TRZ overlap
period defines a time zone with an 80% probability of completing the trend. An
80% TRZ means there is a 90% probability of the trend reaching the minimum
target date and a 90% probability the trend will be complete by the maximum
target date. The time between the minimum and maximum target date is the 80%
TRZ.
A Timely Example For Bonds
The bond example below is timely. This example was completed on Jan. 8 and
will show there is a high probability of completing a minor to intermediate-term
high by Jan. 9. While no time projection routine is 100% accurate, you will see
that there is a 90% probability of at least a minor high by Jan. 9.
The first step is to project the intermediate degree TRZ. The chart below is T-
bonds. The intermediate degree swings typically lasted 3-7 months. The TRZ for
a high is projected from the most recent intermediate-term low on Aug. 26, 1997.
The broad period of Nov. 14-Feb. 10 is projected for the next intermediate term
high.
While this period is too broad a time to take a specific trading position, it does
provide us with the minimum and maximum dates from when to expect the bull
trend from the Aug. 26 low to complete. Once the July 31 high was exceeded, we
should not expect the bull trend to complete prior to Nov. 14 and should
anticipate it to last no longer than Feb. 14. Examine the chart below.
The chart above includes two swing files generated by Dynamic Trader that
overlay the daily data. The thick gray lines are the Reference Swings. They
represent the larger degree bull and bear cycles. The thin blue and red lines
represent the intermediate degree swings which were typically 3-7 months in
length.
Time Rhythm Zone Detail Table
A click on the TRZ on the chart brings up the Time Rhythm Zone Detail Table.
The table shows the low-to-high swings were projected from the most recent low
on Aug. 26 and the high-to-high swings were projected from the most recent high
on July 31. The time overlap of these two projections falls in the period of Nov.
14 to Feb. 10. There is a 90% probability that the next intermediate term high will
not complete prior to Nov. 14 and a 90% probability that it will not extend beyond
Feb. 10.
We have now narrowed the three-month period into a little over a two-week
period. This is still too broad of a period to help us make a trading decision. We
do now know that a top followed by a decline greater in time and price than any
since the Dec. 5 low should be complete by Jan. 15. We now want to see what
smaller periods of time within the Dec. 29-Jan. 15 period have the highest
probability of completing the top. Let's reduce the degree of swings one more
time to see if there is a smaller period of just a few days within the Dec. 29-Jan.
15 period when a high should be made.
Use Intraday Data To Project The Short-Term Cycles
The chart below is March bonds with 5 Bars Per Day of data. Five bars per day
for the bond market are 40 minute bars. I always prefer to divide a trading day up
into even bars. Most of the Dynamic Trader routines and reports are designed for
intraday data as well as daily, weekly and monthly data.
The most recent minor low was made at 11:00 (EST) on Dec. 30. The Time
Rhythm Zone projection shown on the chart below projects the next minor top to
be made between Jan. 5-9. As of the afternoon of Jan. 8 when this article is being
written, bonds have made a new high today. This short-term projection suggests at
least a minor high should be complete by tomorrow, Jan. 9.
Let's reduce the swing degree one more time. The chart below is March bonds
with 10 Bars Per Day (20 minutes). Since the Dec. 5 low (not shown), all of the
very minor high-to-high cycles have been made within the fairly narrow range of
19-25 bars. If this rhythm continues, the next very minor cycle high should be
complete between mid-day on Jan. 8 and mid-day on Jan. 9. We are right in that
time zone now (afternoon of Jan. 8). At least a very-minor high should be
complete by tomorrow Jan. 9. This very short-term cycle high projection falls at
the tail end of the Jan. 5-9 projection for a slightly larger degree top shown on the
previous chart.
Dynamic Trader includes a notepad routine where any comments or notes
may be kept with each chart. The notes kept with the chart below remind the
trader of the larger degree TRZs that are current for the bond market.
where to take a short position with minimum risk in the event the larger
degree top is also complete.
3. The smaller degree swings shown on the 5 Bars Per Day chart identify Jan.
5-9 as the high probability period for a high. Now we are reducing the time
zone to a period from where a trading decision may be made.
4. The very minor swings shown on the 10 Bars Per Day chart provide us with
less than a two day TRZ from where we can make the trading decision for a
short position with very little risk. The potential exists that this less than two
trading day period which overlaps three larger degrees of TRZ projections
may also be the period of the final top of the bull trend from the Aug. low.
This is why I always recommend trading at least two units. One to take
advantage of the short term cycles and the second to take advantage if the
intermediate term cycle also kicks in. If this anticipated short-term top is
exceeded, we will continue to use the TRZ projections from the short-term
cycles to project the next high probability short-term top prior to Feb. 15.
5. While the above example may seem like a lot of time analysis work, consider
that the intermediate TRZ projections shown on the first chart only have to be
made once every few months. The smaller degree projection shown on the
second chart, only have to be made every few weeks. These TRZ periods
may be entered on the notes routine and attached to the trading chart in
Dynamic Trader for easy referral. Dynamic Trader updates each swing file
every time the file is loaded. An updated TRZ projection is only two clicks
away. The smaller degree TRZ projections shown on the intraday charts are
quickly updated every few days and the trader is prepared each day for the
high probability TRZ projections for the minor highs and lows.